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:

Cartilage

A flexible, connective tissue found in various forms in the larynx and respiratory tract, among other locations. It provides structure and support.

Adipose Tissue

A type of body tissue that stores fat, which serves as a source of energy, insulation, and cushioning for organs.

Areolar Connective Tissue

A loose, fibrous tissue found throughout the body that supports and cushions organs and structures, particularly under the skin and around blood vessels and nerves.

Reticular Connective Tissue

A type of connective tissue that supports softer organs of the body with a network of thin, collagenous fibers.