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International Business Finance

In: Quantitative Corporate Finance

Author

Listed:
  • John B. Guerard Jr.

    (McKinley Capital Management, LLC)

  • Anureet Saxena

    (McKinley Capital Mgmt, LLC)

  • Mustafa N. Gültekin

    (University of North Carolina Chapel Hill)

Abstract

With the adoption of flexible exchange rates in 1973, international capital markets have become more completely integrated. This chapter discusses portfolio selection of international equities, and how international diversification lowers total risk of portfolios. Particular attention is paid to the diversification implications of Asian stocks, other emerging markets, and Latin American securities. The US equity selection model developed and estimated in Chap. 14 is used to rank global (ex-US) securities, and produces statistically significant information coefficients and excess returns. An investor owns foreign stocks because their inclusion into portfolios produces higher Sharpe ratios than using only domestic securities. Global and (domestic) US securities may produce portfolios of higher returns for a given level of risk.

Suggested Citation

  • John B. Guerard Jr. & Anureet Saxena & Mustafa N. Gültekin, 2022. "International Business Finance," Springer Books, in: Quantitative Corporate Finance, edition 3, chapter 0, pages 597-611, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-87269-4_21
    DOI: 10.1007/978-3-030-87269-4_21
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