Recent global market behavior that threatens the benefits of international portfolio diversification indicates that markets tend to be most ________ when volatility is greatest.

Question

Quizplus · Accepted Answer

When markets are highly volatile, there is a greater chance that all markets will move in the same direction, leading to increased correlation. This threatens the benefits of international portfolio diversification, as investors may not be able to achieve true diversification if all markets are highly correlated. It is important to note that this correlation can be temporary and may subside as markets stabilize.

Recent Global Market Behavior That Threatens the Benefits of International