FINA 471 Lecture 3: FINA 471 - NOTE CH 13

• School: Concordia University
• Department: Finance
• Course: FINA 471
• Professor: Lobna Bouslimi

Document Summary

Mncs" (cid:373)oti(cid:448)es for dfi: i(cid:373)pro(cid:448)e profita(cid:271)ilit(cid:455) a(cid:374)d e(cid:374)ha(cid:374)(cid:272)e shareholders (cid:449)ealth (cid:894)(cid:271)oosti(cid:374)g revenue, reduce cost: examples: Europea(cid:374) u(cid:374)io(cid:374)"s re(cid:272)e(cid:374)t e(cid:454)pa(cid:374)sio(cid:374): tra(cid:374)sport produ(cid:272)ts throughout. Comparing the benefits of dfi across countries: fir(cid:373)"s optimal method to penetrate a foreign market is dependent on the (cid:373)arket"s (cid:272)haracteristics. For example: if consumers are used to buying products from local firms, then licensing arrangements or joint ventures may be more appropriate. Comparing benefits of dfi over time: conditions change over time = change in (cid:272)ou(cid:374)tries" attra(cid:272)ti(cid:448)e(cid:374)ess for dfi. Benefits of international diversification: selecting foreign projects whose performance levels are not highly correlated over time = various international projects are less likely to experience poor performance simultaneously. International diversification and risk: 2 components: first: potential risk reduction benefits of holding international securities. Portfolio"s risk measured by the portfolio beta: ratio of the variance of a portfolio"s retur(cid:374) relati(cid:448)e to the (cid:448)aria(cid:374)(cid:272)e of the market return.