【精品】multinational financial management（跨国公司财务）ch15 examining international portfolio investing精品ppt课件.ppt

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1、Multinational Financial Management（跨国公司财务管理）ch15 Examining International Portfolio InvestingWhy Invest Internationally?What are the advantages of international investment?THE BENEFITS OF INTERNATIONALEQUITY INVESTINGI.THE BENEFITS OF INTERNATIONALEQUITY INVESTINGA.Advantages1.Offers more opportuniti

2、es thana purely domestic portfolio2.Attractive investments overseas3.Impact on efficient portfolio with diversification benefitsII.Basic Portfolio TheoryII.Basic Portfolio TheoryA.What is the efficient frontier?It represents the most efficient combinations of all possible risky assets.The Efficient

3、FrontierE(r)ABBasic Portfolio TheoryC.Total Risk D.1.A Securitys Returns may be segmented intoSystematic Riskcan not be eliminatedNon-systematic Riskcan be eliminated by diversificationThe Benefits of Intl DiversificationINTERNATIONAL DIVERSIFICATION2.International diversification and systematic ris

4、ka.Diversify across nations withdifferent economic cyclesb.While there is systematic riskwithin a nation,outside the country it may be nonsystematic and diversifiableINTERNATIONAL PORTFOLIO INVESTMENT3.Recent Historya.National stock markets have widedifferences in returns and risk.b.Emerging markets

5、 have higherrisk and return than developed markets.c.Cross-market correlations havebeen relatively low.INTERNATIONAL PORTFOLIO INVESTMENT4.Theoretical ConclusionInternational diversification pushes out the efficient frontier.The New Efficient FrontierE(r)ABCCROSS-MARKET CORRELATIONS5.Cross-market co

6、rrelationsa.Recent markets seem to be most correlated when volatility is greatestb.Result:Efficient frontier retreatsThe Frontier During Global CrisesE(r)ABCInvesting in Emerging MarketsD.Investing in Emerging Marketsa.Offers highest risk and returnsb.Low correlations with returnselsewherec.As imped

7、iments to capital market mobility fall,correlations are likely to increase in the future.Barriers to International DiversificationE.Barriers to International Diversification1.Segmented markets2.Lack of liquidity3.Exchange rate controls4.Underdeveloped capital markets5.Exchange rate risk6.Lack of inf

8、ormationa.not readily accessibleb.data is not comparableOther Methods to DiversifyF.Diversify by a 1.Trade in American DepositoryReceipts(ADRs)2.Trade in American shares3.Trade internationally diversifiedmutual funds:a.Global(all types)b.International(no home country securities)c.Single-countryINTER

9、NATIONAL PORTFOLIO INVESTMENT4.Calculation of Expected Portfolio Return:rp =a rUS +(1-a)rrw where rp=portfolio expected return rUS=expected U.S.market return rrw =expected global returnExpected Portfolio ReturnSample ProblemWhat is the expected return of a portfolio with 35%invested in Japan returni

10、ng 10%and 65%in the U.S.returning 5%?rp =a rUS +(1-a)rrw=.65(.05)+.35(.10)=.0325+.0350=6.75%Expected Portfolio ReturnCalculation of Expected Portfolio Risk where=the cross-market correlation US2 =U.S.returns variance r w2 =World returns variancePortfolio Risk ExampleWhat is the risk of a portfolio w

11、ith 35%invested in Japan with a standard deviation of 6%and a standard deviation of 8%in the U.S.and a correlation coefficient of.7?=(.65)2(.08)2+(.35)2(.06)2 +2(.65)(.35)(.08)(.06)(.7)1/2 =6.8%INTERNATIONAL PORTFOLIO INVESTMENTIV.MEASURING TOTAL RETURNSFROM FOREIGN PORTFOLIOSA.To compute dollar ret

12、urn of a foreign security:orINTERNATIONAL PORTFOLIO INVESTMENTBond(calculating return)formula:whereR$=dollar return B(1)=foreign currency bond price at time 1(present)C =coupon income during periodg =currency depreciation or appreciation INTERNATIONAL PORTFOLIO INVESTMENTB.(Calculating U.S.$Return)S

13、tocks Formula:whereR$=dollar returnP(1)=foreign currency stock price at time 1D=foreign currency annual dividend U.S.$Stock Returns:Sample ProblemSuppose the beginning stock price if FF50 and the ending price is FF48.Dividend income was FF1.The franc depreciates from FF 20/$to FF21.05/$during the year against the dollar.What is the stocks US$return for the year?U.S.$Stock Returns:Sample Solution