Since security returns tend to have low correlations among countries,
A)investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically.
B)investors who have a domestically diversified portfolio, with exposures across industry types will not gain much from diversifying abroad.
C)investors who diversify internationally will likely underperform investors who keep all their investments in one country.
D)none of the above

Question

Quizplus · Accepted Answer

Since security returns have low correlations among countries, investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically. This is because diversifying internationally allows investors to gain exposure to different economic and geopolitical conditions, which can help to mitigate the impact of any single country's market movements on their portfolio.

Since Security Returns Tend to Have Low Correlations Among Countries