Title: Foreign Stock Markets: Industrial Countries of Europe and the Pacific
Abstract: Dating back to the early 1990s, Americans preferred investing in U.S. stocks rather than in European companies. Although for 20 years foreign stock returns exceeded the U.S. returns, most investors avoided emerging markets. For several years, there have been wide variations in performance across regions of the world. Moreover, in 1970s and 1980s, European and Japanese markets outperformed the U.S. market. This chapter considers the case of diversification into the stocks of the industrial countries. It has been shown that the emerging markets have beaten the developed markets in recent years. The results show that the returns on foreign and U.S. stock markets are significantly close to one another. When stocks move together, the correlation between the stocks is high. The reason behind this abrupt increase in correlations in the early 1990s is explained in this chapter. Investors prefer to find short-cuts to investing in stocks that are listed on foreign exchanges. American Depository Receipts (ADRs) make it convenient for Americans to invest in foreign stocks. This chapter also discusses the ADRs market and its diversification internationally.
Publication Year: 2014
Publication Date: 2014-06-13
Language: en
Type: other
Indexed In: ['crossref']
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