Errunza, Hogan, and Hung ["Can the Gains from International Diversification be Achieved Without Trading Abroad?" Journal of Finance, 1999] found that ______.

Question

Quizplus · Accepted Answer

According to Errunza, Hogan, and Hung ["Can the Gains from International Diversification be Achieved Without Trading Abroad?" Journal of Finance, 1999], U.S. investors can replicate the diversification benefits of foreign market returns with securities that are already traded in the United States. Therefore, they do not necessarily need to invest directly in foreign markets to achieve the benefits of international diversification. Option A is incorrect because the study did not mention anything about the benefits of international diversification remaining constant over time. Option B is incorrect because the study did not mention anything about the proportion of foreign stocks held in U.S. investors' portfolios affecting the benefits of international diversification. Option D is also incorrect because the study found that U.S. investors can replicate the diversification benefits of foreign market returns without investing directly in foreign markets.