Bekaert and Harvey ["Foreign Speculators and Emerging Equity Markets," Journal

question 25

Multiple Choice

Bekaert and Harvey ["Foreign Speculators and Emerging Equity Markets," Journal of Finance, 2000] found which of the following?

• A) A decrease in the country risk of an emerging market tends to be followed by a fall in equity share prices.
• B) Emerging markets with high country risk tend to have higher betas than markets with low country risk.
• C) Emerging markets with high country risk tend to have less volatile returns than markets with low country risk.
• D) Financial market liberalizations tend to increase local firms' cost of capital.
• E) Financial market liberalizations tend to increase the correlation of emerging markets with the rest of the world.

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Definitions:

Principal-Agent Problem

A dilemma in which one party (the agent) is supposed to act in the best interest of another party (the principal) but may act in their own interest instead due to conflicts of interest.

Corporate Structure

Describes the organization of a company, including its legal structure, division of responsibilities, and hierarchical levels.

Proprietorship

A business firm owned by an individual who possesses the ownership right to the firm’s profits and is personally liable for the firm’s debts.

Operational Efficiency

The capability of an organization to deliver products or services in a cost-effective manner while ensuring high quality.