Exam 13: International Equity Markets

Asprem (1989)found that changes in industrial production,employment,and imports,the level of interest rates,and an inflation measure explained only a small portion of the variability of equity returns for 10 European countries,but that substantially more of the variation was explained by

Investment in foreign equity markets

On the Paris bourse,shares of Avionelle trade at €45.The spot exchange rate is $1.40 = €1.00.What is the no-arbitrage U.S.dollar price of an Avionelle ADR? Assume that transactions costs are negligible.

A limit order

Which investment is likely to be the least liquid?

Price discovery in the secondary stock markets

A market-value index

Which type of trading system is desirable for actively traded issues?

In mutual funds,investment in emerging foreign equity markets

Sponsored ADRs

Only in the _______ did world investors start to invest sizable amounts in the emerging equity markets,as the economic growth and prospects of the developing countries improved.

In 2002,24 stock markets had concentration ratios of 40 percent or more,16 had 50 percent or more,and 6 had 60 percent or more.By comparison,in 2006,27 stock markets had concentration ratios of 40 percent or more,21 had 50 percent or more,and 11 had 60 percent or more.Thus,one must conclude

In which type of market can liquidity "dry up"?

Calculate the dollar-based percentage return an American would have if he bought a British stock at ₤50 per share and sold it one year later at ₤60.The spot exchange rate one year ago was $1.50 = ₤1 and the spot rate prevailing at the end of the year was $1.20 = ₤1.

In a dealer market,the broker takes the trade through the dealer,who participates in trades as a principal by buying and selling the security for his own account.

A specialist on the NYSE

Decompose the return an American would have if he had bought a German stock at €100 per share and sold it one year later at €120.The spot exchange rate one year ago was $1.50 = €1 and the spot rate prevailing at the end of the year was $1.55 = €1.

Many of the larger emerging equity markets (e.g.Korea,India)

The European Stock Exchange,comparable in volume to the NYSE

Which investment is likely to be the most liquid?