Innocents Abroad: Currencies and International Stock Returns
HBS Publishing Case No.: 9-204-141; Teaching Note No.: 5-206-012
Posted: 31 Oct 2005
Date Written: November 15, 2004
SUBJECT AREAS: Currency, Foreign exchange, International finance, Investment management, Money, Stocks
CASE SETTINGS: Global; Financial services; 8 employees; 2004
What do international stocks contribute to the portfolio of a U.S. investor? How do currencies interact with stock price movements in determining the benefits of international diversification? This case helps students compare the risks and returns of foreign stock markets with each other and with the U.S. market and to examine the risks and returns of international diversification. Students must calculate returns, adjust for currencies, derive correlations, and map efficient frontiers based on raw data.
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