Global%20Investment:%20Risk%20Management

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Global Investment Risk Management

• Chenghsien Tsai
• Department of Risk Management and Insurance
• National Chengchi University

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The Benefits of Global Investments

• Larger Investment Opportunity Sets
• More efficient portfolios
• Higher returns and/or less risk

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However

• Involve one additional risk factor foreign
  exchange rate
• Parameter Estimation Risk (not to mention model
  risk)

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Exhibit 1 in Eichhorn, Gupta, and Stubbs (1998)
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Exhibit 3
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Exhibit 5
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Exhibit 6
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Exhibit 8
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More Concerns

• Information Asymmetry
• Agency Problems