Since Security Returns Tend to Have Low Correlations Among Countries

question 20

Multiple Choice

Since security returns tend to have low correlations among countries,

• A)investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically.
• B)investors who have a domestically diversified portfolio, with exposures across industry types will not gain much from diversifying abroad.
• C)investors who diversify internationally will likely underperform investors who keep all their investments in one country.
• D)none of the above

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Definitions:

Signal Detection

A theory and method for quantifying the ability to differentiate between information-bearing patterns and random patterns that distract from the information.

Optic Nerve

A cranial nerve that transmits visual information from the retina to the brain, facilitating the sense of sight.

Blind Spot

The area in the visual field that lacks detection by the retina due to the absence of photoreceptor cells where the optic nerve exits the eye.

Retina

The thin inner surface of the back of the eyeball; this surface contains the sensory receptors.