Exam 19: International Securities Markets

Most major foreign firms listed on the New York Stock Exchange, such as Canada Pacific Railway, trade their stocks directly on the NYSE rather than using ADRs.

Between year-end 2002 and 2005, the value of the United States equity markets as a percentage of the total world equity markets has:

An investor who wishes to achieve high returns and low risk exposure through international diversification would probably look for:

To some extent, in recent years Japan demonstrates that stock market growth is related to economic growth.

U.S. multinational corporations are highly correlated with United States financial markets and therefore do not reduce portfolio risk to the same extent as investing in foreign corporations.

Less developed countries may provide even greater risk reduction in a portfolio than developed countries.

Correlations between U.S. returns and foreign stock returns appear to remain fairly stable from period to period.

Direct international investment without the numerous associated administrative problems can be achieved by purchasing shares:

Currency fluctuations and rates of return are the only really important things to consider when investing internationally.

At the peak of the stock market bubble in 1999, the value of the developed world's stock market was $33 trillion. By 2002, the value had declined to less than $21 trillion. By year-end 2005, after several years of worldwide economic growth, the developed markets reached $36.5 trillion.

Information on publicly traded foreign securities is not as regulated or as available as it is on United States securities.

ADRs (American Depository Receipts) represent an ownership interest in a foreign company's common stock.

The investor can maximize risk reduction benefits by combining United States securities with those of countries which are ________.

Since the beginning of the 1990s, we have seen major growth in "emerging" markets, such as Chile, Mexico, Poland, and the Czech Republic.

As a general rule, transaction costs are lower in foreign markets than in the United States.

Emerging markets have the following characteristics:

Investing in an international mutual fund does not help the investor avoid the administrative problems one would encounter if investing directly in foreign securities.

If the emerging markets were taken as a group at the end of 2005, their total market capitalization would rank them second behind the United States.

Emerging markets seem to have fairly consistent valuation standards and ratios.

Even though Korea and China have markets bigger than some markets in developed countries, they are considered to be emerging markets because they have low per-capita gross domestic product.