Moving in step? One reason to invest abroad is that markets in differentcountries dont
Chapter 0, Problem 7.33(choose chapter or problem)
Moving in step? One reason to invest abroad is that markets in differentcountries dont move in step. When American stocks go down, foreign stocks maygo up. So an investor who holds both bears less risk. Thats the theory. Now weread: The correlation between changes in American and European share priceshas risen from 0.4 in the mid-1990s to 0.8 in 2000.12 Explain to an investor whoknows no statistics why this fact reduces the protection provided by buyingEuropean stocks.
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