Portfolio Diversification of Domestic Firms Reduces Risk Because Cash Flows

question 43

True/False

Portfolio diversification of domestic firms reduces risk because cash flows are not perfectly correlated. The same reasoning is often argued for MNEs diversifying into international markets.

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Definitions:

Selective Attention

The cognitive process of focusing on a particular object or task while ignoring irrelevant information.

Cognitive Dissonance

A psychological discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time.

Consciousness

The awareness of one's own thoughts, feelings, and environment, serving as the basis for subjective experience.

Hypnagogic Hallucinations

Vivid and often bizarre sensory experiences that occur during the onset of sleep, lying between wakefulness and sleep.