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BUS330: International Finance: Post-Topic11 (Chapter 17) International Equity Markets

This document provides information and problems for students regarding the International Equity Markets chapter of the BUS330: International Finance course. It outlines key terms related to market microstructure and reasons why companies cross-list their shares on foreign exchanges. It also asks students to calculate the expected returns and standard deviations of various international portfolios to determine which country, the UK or Spain, provides the best diversification for Australian investors.

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Delisha
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47 views

BUS330: International Finance: Post-Topic11 (Chapter 17) International Equity Markets

This document provides information and problems for students regarding the International Equity Markets chapter of the BUS330: International Finance course. It outlines key terms related to market microstructure and reasons why companies cross-list their shares on foreign exchanges. It also asks students to calculate the expected returns and standard deviations of various international portfolios to determine which country, the UK or Spain, provides the best diversification for Australian investors.

Uploaded by

Delisha
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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BUS330: International Finance

Post-Topic11 (Chapter 17)


International Equity Markets

Students should study about the International Equity Markets (chapter 17) thoroughly
to prepare Final Exam. As part of final exam preparation, students should solve
following post-topic11 problems by employing their understandings/concepts that
have been developed through pre-topic11 and topic11 sessions.

Post-Topic11 Problems

1. Market Microstructure Distinguish between the following terms:


a. Market order versus limit order
b. Price priority versus time priority
c. Call market versus continuous market

2. Foreign Market Listing and Issuance Explain why an Australian company might
cross-list and sell its shares on a very liquid stock exchange such as the New York
Stock Exchange?

3. Barriers to Cross-listing What are some of the barriers to cross-listing shares in


a foreign market?

4. Equity market instruments What are the alternative instruments that can be
used to raise equity from global markets?

7. International Diversification What are the different instruments through which an


Australian investor can diversify internationally?

a. Assume that you are a retail investor? Would you prefer some instruments to
others?

b. Assume that you are an institutional investor? Would you prefer some instruments
to others?

1
10. Portfolio of International Funds An Australian portfolio manager is considering
increasing the diversification of her portfolio by investing in foreign mutual funds with
the following features:

Australia United Kingdom


Spain
Expected Return 15% 12% 6%
Standard Deviation 10% 9% 6%
Correlation with Australia 1.0 0.40
0.05

a. Compute the expected return and standard deviation of the following


portfolios:

Portfolio A: 25% UK, 75% Australia


Portfolio B: 25% Spain, 75% Australia
Portfolio C: 50% UK, 50% Australia
Portfolio D: 50% Spain, 50% Australia
Portfolio E: 75% UK, 25% Australia
Portfolio F: 75% Spain, 25% Australia

b. Based on your calculation in a) above, which country seems to offer the best
diversification potential for Australian investors – UK or Spain?

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