Empirical Research Has Found That Systematic Risk for MNEs Is

question 32

Multiple Choice

Empirical research has found that systematic risk for MNEs is greater than that for their domestic counterparts. This could be due to

• A)the fact that the increase in the correlation of returns between the market and the firm is less than the increase in the standard deviation of returns of the firm.
• B)the fact that the decrease in the correlation of returns between the market and the firm is greater than the increase in the standard deviation of returns of the firm.
• C)the reduction in the correlation of returns between the firm and the market is less than the increase in the variability of returns caused by factors such as asymmetric information, foreign exchange risk, and the like.
• D)none of the above. Systematic risk is less for MNEs than for their domestic counterparts.

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Definitions:

Adler

Refers to Alfred Adler, an Austrian medical doctor and psychotherapist, known for founding the school of individual psychology which emphasizes the importance of feelings of inferiority and the creative self.

Overcompensate

To make up for deficiencies in one area by excelling or exaggerating in another.

Adler

Alfred Adler was an Austrian medical doctor, psychotherapist, and founder of the school of individual psychology, known for his concepts of inferiority complex and striving for superiority.

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