Studies Show That International Stock Markets Tend to Move More

question 56

Multiple Choice

Studies show that international stock markets tend to move more closely together when the volatility is higher.This finding suggests that

• A)investors should liquidate their portfolio holdings during turbulent periods.
• B)since investors need risk diversification most precisely when markets are turbulent,there may be less benefit to international diversification for investors who liquidate their portfolio holdings during turbulent periods.
• C)this kind of correlation is why international portfolio diversification is smart for today's investor.
• D)none of the options

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Definitions:

Voting Common Stock

Shares of a company that grant the shareholder voting rights in corporate decisions, typically related to the election of the board of directors.

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies, where the investment is recorded at cost and adjusted for dividends received and the investor's share of the investee's profit or loss.

Consolidation

The process of combining the financial statements of separate subsidiary entities into one comprehensive financial statement of the parent company.

Goodwill

An intangible asset that arises when one company acquires another for a premium value, representing the excess of the purchase price over the fair market value of the identifiable assets and liabilities.