Volatility

question 2

Multiple Choice

Volatility:

• A)is the degree of variability in security prices
• B)if excessive, can contribute to market liquidity
• C)arises primarily from bid-offer bounce
• D)can encourage risk-averse traders
• E)All of these.

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Definitions:

ADRs

American Depository Receipts (ADRs) are a type of negotiable security that represents shares in a foreign company and is traded on a local stock exchange but represents a specified number of shares in a foreign corporation.

Foreign Firms

Companies that are based in one country but operate and conduct business in other countries.

EAFE Index

An index that measures the stock market performance of developed markets outside of the United States and Canada.

Non-U.S. Stocks

Shares of companies based outside of the United States, often used to diversify investment portfolios.