International Equity Securities

Question 1

What is the EAFE? (3 facts)

Answer 1

Europe, Australasia, & Far East Index

Includes 21 countries

Morgan Stanley runs it

Question 2

Are international Stocks more or less volatile than US stocks?

Answer 2

MORE VOLATILE

Question 3

With regard to US and foreign markets, explain how correlation works

Answer 3

Foreign stocks are more volatile and often offset US markets. This creates diversification and less risk in your portfolio

Question 4

4 types of risk to consider with international investing

Answer 4

1. Country Risk - political, single country, economic, civil unrest
2. Currency Risk - $ > convert > buy > sell > convert > $
3. Liquidity Risk - can be hard to quickly liquidate foreign securities
4. Information Risk - foreign reporting standards may not be as good as US

Question 5

What are American Depository Receipts?

Answer 5

Certificates traded on common US stock exchanges that represent ownership of a foreign company trading in US financial markets