Question

what si the source of diversification benefits when investing interantionally . Provide example

Answer 1

There are various diversification benefits which can be achieved when there is investment which is made internationally.

There are diversification benefits will be including-

A. Benefits through exchange rate fluctuation because it will protect against any decrease in the value of the domestic currency

B. Probability of making higher return due to larger risk involved

C.unsystematic risk of portfolio get eliminated because of investment into a large number of foreign assets

D.Probabilty of makung return even when the domestic market is providing lesser rate of return

E.it will also help in gaining through monetary policy of other countries through interest rates and inflation.

If any United States investors are investing into Indian markets they will be gaining through capital appreciation as well as depreciation in the value of the Indian rupees.l