Empirical Research Has Found That Systematic Risk for MNEs Is

question 41

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:

Cortex

In plants, ground tissue bounded by the epidermis and vascular tissue in stems and roots; in animals, outer layer of an organ, such as the cortex of the kidney or adrenal gland.

Vascular Cylinder

The central part of a plant's root system that contains the plant's vascular tissue, including xylem and phloem, for water and nutrient transport.

Casparian Strip

A band of cell wall material in the roots of plants that is impervious to water and solutes, controlling the flow into the vascular system.

Endodermis

The endodermis is the innermost layer of cells in the root cortex of plants, serving as a selective barrier that regulates the flow of water and nutrients from the soil into the vascular system.