Which of the following statements about international portfolio investing is TRUE?
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A. B. C. D.Explanation
U.S. investors are not internationally diversified, because of the following barriers: regulatory accounting and disclosure requirements that keep many foreign firms from registering and selling their shares in the U.S. capital markets, higher international trading costs, complications of foreign tax laws, and foreign exchange transaction cost and risk. Emerging markets offer the greatest degree of diversification and the highest expected returns because of their low correlations (due to volatile economic and political natures). Industrial composition and currency movements are not considered factors that impact correlations. The benefits of diversification increase when the weights used do not conform to relative market capitalization weights.