Essentials of Investments: Chapter 19 - Globalization and International Investing includes Risk Factors in International Investing, Exchange Rate Risk, Hedging Exchange Rate Risk, Political Risk. | CHAPTER 19 Globalization and International Investing INVESTMENTS | BODIE, KANE, MARCUS McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 25-2 Background • Of the six largest • The . accounts countries – ., for only about a third Japan, ., France, of world stock Hong Kong and market Canada – make up capitalization. about 62% of the • Emerging markets world stock market. make up about 16% • The weight of the of the world stock . within this group market. of six is 54%. INVESTMENTS | BODIE, KANE, MARCUS 25-3 Background • Clearly, . stocks do not comprise a fully diversified equity portfolio. • International investing provides greater diversification opportunities. • It also carries some special risks. INVESTMENTS | BODIE, KANE, MARCUS 25-4 Figure Per Capita GDP and Market Capitalization as Percentage of GDP INVESTMENTS | BODIE, KANE, MARCUS 25-5 Issues • A developed stock market enriches the population. • Home-country bias: – Investors frequently overweight homecountry stocks. – They may even completely ignore opportunities for international diversification. INVESTMENTS | BODIE, KANE, .
