How does international diversification help reduce risk?

how does international diversification help reduce risk?

Level - INTERMEDIATE

Risks that cannot be diversified or reduced in a domestic context, can be reduced by diversifying internationally. Watch this investor education video by Moneykraft.

AUTHOR(S): Uma Shashikant

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How does international diversification help reduce risk?

 Risks that cannot be diversified or reduced in a domestic context, can be reduced by diversifying internationally.

1 2 3 4 5

    1.How does international diversification impact a pure domestic portfolio?



  • Reduces unsystematic risk
  • Reduces inflation risk
  • Reduces systematic risk
  • 2.Which of the following is an example of systematic risk?



  • HDFC Bank announces lower than expected earnings
  • Indian GDP falls sharply
  • Luxury watches companies post lower profits
  • 3.Which of the following is NOT a method of international diversification for an Indian investor?



  • Purchase of Government of India bonds
  • Purchase of International Mutual Fund
  • Direct purchase of American securities
  • 4.Diversification among stocks in different industries is _____ than diversification within the industry



  • less effective
  • more effective
  • as effective as
  • 5.The risk which does not reduce even with increasing the number of assets in the portfolio is



  • Unsystematic risk
  • Firm-specific risk
  • Systematic Risk
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