Examine international markets and the risk/reward benefits of holding foreign securities in an...

Question

Examine international markets and the risk/reward benefits of holding foreign securities in an investment portfolio. Identify the modern portfolio theory (MPT) concepts that lend support to investing in foreign markets.

address the following critical elements:

From a practical standpoint, how do internationalmarkets differ from domestic markets?
What role do international securitiesplay in a corporate portfolio?
In what ways do investors quantify the risk levelsbetween domestic and foreign securities?
What asset allocation strategiesand weightings would you consider when investing in international securities? Explain your reasoning.

Robert · Accepted Answer

Investment in foreign securities: International Investment 
International markets are formed of securities which are traded globally. An investor residing in 
one country can transact (purchase, sale, hold and invest) in the securities of organizations of 
other country. ADRs, GDRs, Mutual Funds, Exchange-traded funds are examples of such 
securities that are traded in international market. Whereas domestic markets only allow a 
investor to trade in the securities of domestic or local organizations. 
An investor going international particularly looks to obtain some gain from the growth and 
diversification of the other countries’ economy. No particular economy has constantly remained 
on the top and vice versa. Thus proper portfolio management can diversify the risk of the 
investor that pertains to a particular economy. It also provides it an opportunity to gain advantage 
when a particular economy performs better than others.  
Modern Portfolio suggests having a portfolio which has all the risks diversified and calculated. It 
talks about two kind of risks systematic and unsystematic risk.

Examine international markets and the risk/reward benefits of holding foreign securities in an investment portfolio. Identify the modern portfolio theory (MPT) concepts that lend support to investing...

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