Investments Chapter 19 homework

11) Including international equities as an additional asset for a pension fund:
a) Investing part of the pension fund in international equities can increase expected return and will create a more active portfolio as well as help diversify risk among different currencies.
Pros:
Higher growth, unique—diversificationless risk, business cycles, foreign exchange, different interest rates

• The correlation coefficients between a stock index of one country and bond portfolios of another are very low—a portfolio balanced between stocks and bonds would greatly benefit from international diversification.
• International diversification can reduce the standard deviation of a domestic portfolio by almost 50%.
• Investing in emerging markets results in higher average returns, so a portfolio balanced between emerging markets and developed countries may be a way to lessen risk but also maintain a higher return.
b) Investing in......

Join Now to view the rest of this term paper!
Members: Login to view this research paper.

Title: Investments Chapter 19
Approximate Word Count: 437
Approximate Pages: 2 (250 words per double-spaced page)

With the Term Papers Lab Membership Pass, you get instant access to every essay on this site, including this essay on Investments Chapter 19, for as long as you remain a member.

Other essays sites charge almost $100 for a single term paper. At Term Papers Lab, you can get instant access to over 100,000 research papers for as little as $29.95!