The Relatively Low Correlation Between the Movements of Stock Markets

question 21

Multiple Choice

The relatively low correlation between the movements of stock markets in different countries reflects all of the following basic factors except:

• A)countries pursue different macroeconomic policies and face different economic conditions,so their stock markets respond to different forces and can move in different ways.
• B)different stock markets are still somewhat segmented from each other by capital controls.
• C)restrictions on cross-border capital flows still separate different stock markets.
• D)barriers to cross-border capital flows drastically increase the ability of capital to roam the world freely in search of the highest risk-adjusted return.

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Definitions:

Money Market Funds

Investment funds that invest in short-term debt securities with the aim of offering high liquidity with a low level of risk.

Institutional Funds

Investment pools that target large-scale investments, managed by professionals and accessible mainly to institutional investors.

Increased Disclosure

The practice of making more financial and operational information available to the public or regulatory bodies, aiming to improve transparency.

Redemptions

The process of returning an investment’s principal at maturity or withdrawing funds from an account, often seen in mutual funds or fixed-income securities.