Examine international markets and the risk/reward benefits of holding foreign securities in an investment portfolio. Identify the modern portfolio theory (MPT) concepts that lend support to investing...

Investment in foreign securities: International Investment
International markets are formed of securities which are traded globally. An investor residing in
one country can transact (purchase, sale, hold and invest) in the securities of organizations of
other country. ADRs, GDRs, Mutual Funds, Exchange-traded funds are examples of such
securities that are traded in international market. Whereas domestic markets only allow a
investor to trade in the securities of domestic or local organizations.
An investor going international particularly looks to obtain some gain from the growth and
diversification of the other countries’ economy. No particular economy has constantly remained
on the top and vice versa. Thus proper portfolio management can diversify the risk of the
investor that pertains to a particular economy. It also provides it an opportunity to gain advantage
when a particular economy performs better than others.
Modern Portfolio suggests having a portfolio which has all the risks diversified and calculated. It
talks about two kind of risks systematic and unsystematic risk. Unsystematic risk arises due to
micro level factors pertaining to a particular organization whereas systematic risk is the result of
macro level...