Chapter 3 - Lecture Presentation Software to accompany...

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Lecture Presentation Software to accompany Investment Analysis and Portfolio Management Eighth Edition by Frank K. Reilly & Keith C. Brown Chapter 3
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: Why should investors have a global perspective regarding their investments?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: What has happened to the relative size of U.S. and foreign stock and bond markets?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: What are the differences in the rates of return on U.S. and foreign securities markets?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: How can changes in currency exchange rates affect the returns that U.S. investors experience on foreign securities?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: Is there an additional advantage of diversifying in international markets beyond the benefits of domestic diversification?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: What alternative securities are available? What are their cash flow and risk properties?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: What is the historical return and risk characteristics of the major investment instruments?
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Chapter 3 - Selecting Investments in a Global Market Questions to be answered: What is the relationship among returns for foreign and domestic investment instruments? What is the implication of these relationships for portfolio diversification?
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Reasons for the expansion of investment opportunities 1. Growth and development of foreign financial markets 2. Advances in telecommunications technology 3. Mergers of firms and security exchanges
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The Case for Constructing Global Investment Portfolios 1. Ignoring foreign markets can substantially reduce the investment choices for U.S. investors 2. The rates of return on non-U.S. securities often have substantially exceeded those for U.S.-only securities 3. The low correlation between U.S. stock markets and many foreign markets can help to substantially reduce portfolio risk
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Relative Size of U.S. Financial Markets 1. The share of the U.S. in world stock and bond markets has dropped from about 65 percent of the total in 1969 to about 51 percent in 2003 2. The growing importance of foreign securities in world capital markets is likely to continue
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Relative Size of U.S. Financial Markets Overall value of the total investable capital market has increased from $2.3 Trillion in 1969 to $70.9 Trillion in 2003 and the U.S. portion has declined to less than half. This trend is likely to continue
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The Case for Global Investments Rates of return available on non-U.S.
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