TAILIEUCHUNG - Charles J. Corrado_Fundamentals of Investments - Chapter 19

CHAPTER 19 International Finance and Investments Investing overseas adds an international flavor to your portfolio. You can invest in an Argentine telephone company, an Italian auto company, or a Japanese electronics company as easily as you can invest in a . book publishing company. | CHAPTER 19 International Finance and Investments Investing overseas adds an international flavor to your portfolio. You can invest in an Argentine telephone company an Italian auto company or a Japanese electronics company as easily as you can invest in a . book publishing company. Your overseas investments can increase your portfolio s diversification but they also add a new risk element - you have to watch out for adverse exchange rate movements. The rapid growth of global financial markets has made a knowledge of international finance and investments more important than ever before. Foreign currency markets are by far the most active markets in the world with more than 1 trillion of currency transactions occurring daily among commercial banks. In comparison daily trading on the New Y ork Stock Exchange is only a relatively small fraction of that amount. Despite the increasing integration of international financial markets almost all countries maintain their own legal system and central bank and they pursue their own fiscal and monetary policies. Moreover global economic and political structures are evolving rapidly in directions that are often unpredictable. The immediate implication for investors is that investments in other countries have unique risk and return characteristics that must be dealt with. Coping with the international investment environment is a challenging task for money managers everywhere. Nevertheless despite the difficulties involved many international investment managers have succeeded brilliantly. 2 Chapter 19 The purpose of this chapter is to familiarize you with some of the most important aspects of international finance and investments. Although reading this chapter does not guarantee that you will become a brilliant international investor it is at least a first step. Perhaps the most important thing to realize before you begin your journey is that all that you already know about investments generally applies to international .

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