The variation in betas of emerging markets suggests that ____________.

Question

Quizplus · Accepted Answer

The variation in betas of emerging markets suggests that international diversification may reduce portfolio risk. This is because there is no uniformity in the betas of emerging markets, and some markets may be riskier than others. Therefore, by diversifying across different emerging markets, an investor can potentially reduce portfolio risk. Option A is incorrect because the variation in betas indicates that emerging markets are not more uniform than developed markets. Option B is incorrect because beta does hold in international markets, but the variation indicates that it may not be uniform across all emerging markets. Option D is incorrect because there is no evidence to suggest that riskier emerging markets have uniformly lower betas.

The Variation in Betas of Emerging Markets Suggests That ____________