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- How does the Broader Diversification Reduce Risk?Discuss how the following hinder or become barriers to international diversification of portfolios of investment. Segmented markets Lack of liquidity Exchange rate controls Less developed capital marketsWhat is hedging and how is it different from diversification? If a firm needs to manage its risk, will you recommend diversification or hedging? Why?
- 4. What are the advantages and disadvantages of foreign investing?Discuss the following barriers to international diversification. 1. Segmented markets2. Lack of liquidity3. Exchange rate controls4. Less developed capital markets5. Exchange rate risk6. Lack of informationWhich of the following statements is most correct? (Ch. 8) Group of answer choices Diversification does not affect risk. Diversification works better when investments are concentrated within one industry rather than across all industries. As an investment strategy, diversification should generally be avoided. Diversification eliminates market risk (also known as systematic or non-diversifiable risk). Diversification eliminates firm-specific risk (also known as non-systematic or diversifiable risk).
- 4. What is Dunning's OLI framework and how does it help us to understand foreign direct investment ?What are the benefits of international portfolio diversification? Outline the arguments in favour of diversifying internationally than domestically. Discuss the possible reasons why securities are much less correlated across countries than within a country.What is the difference between technology risk and operational risk? How does internationalizing the payments system among banks increase operational risk
- H5. Distinguish between active and passive investment management styles. What are the advantages of each approach? Which approach would a proponent of an efficient market tend to use? Why? Explain with detailsWhat do you know about arbitrage opportunity? Discuss with examples. Also, present a scenario of any type of international arbitrage if possible. If so, how would it be executed and how would market forces be affected? Does arbitrage opportunity destabilize foreign exchange markets?Discuss and illustrate how the following barriers affect diversification of portfolios into international markets: Segmented markets Exchange rate controls Less developed capital markets Exchange rate risk
