Hostname: page-component-78c5997874-j824f Total loading time: 0 Render date: 2024-11-15T13:11:21.076Z Has data issue: false hasContentIssue false
  • English
  • Français

Investor Benefits from Corporate International Diversification

Published online by Cambridge University Press:  06 April 2009

H. L. Brewer
Get access Rights & Permissions [Opens in a new window]

Extract

This study focuses on the risk-return characteristics of investments in the common stocks of U.S.–based multinational corporations (MNCs) and U.S. national corporations (NATLs). Findings follow from a comparison of the risk-adjusted performance of MNCs and NATLs using the framework of the capital asset pricing model (CAPM). Results of this comparison challenge assertions of earlier writers that marginal benefits or advantages accrue from investments in MNCs as compared to NATLs.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 16 , Issue 1 , March 1981 , pp. 113 - 126
Copyright
Copyright © School of Business Administration, University of Washington 1981

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Adler, M., and Dumas, B.. “Optimal International Acquisitions.” Journal of Finance, Vol. 30 (03 1975), pp. 1–20.Google Scholar
[2]Agmon, T. “The Relations among Equity Markets: A Study of Share Price Co-movements in the United States, United Kingdom, Germany and Japan.” Journal of Finance, Vol. 27 (09 1972), pp. 839–855.Google Scholar
[3]Agmon, T., and Lessard, D. R.. “Investor Recognition of Corporate International Diversification.” Journal of Finance, Vol. 32 (09 1977), pp. 1049–1055.Google Scholar
[4]Black, F. “Capital Market Equilibrium with Restricted Borrowing.” Journal of Business, Vol. 45 (07 1972), pp. 444–455.Google Scholar
[5]Black, F.; Jensen, M.; and Scholes, M.. “The Capital Asset Pricing Model: Some Empirical Tests.” In Studies in the Theory of Capital Markets, Jensen, M.C., ed. New York: Praeger (1972).Google Scholar
[6]Bruck, N. K., and Lees, F. A.. “Foreign Investment, Capital Controls and the Balance of Payments.” The Bulletin (04 1968).Google Scholar
[7]Chow, G. C. “Tests of the Equality between Sets of Coefficients in Two Linear Regressions.” Econometrica, Vol. 28 (07 1960), pp. 591–605.CrossRefGoogle Scholar
[8]Cohn, R. A., and Pringle, J. J.. “Imperfections in International Financial Markets: Implications for Risk Premia and the Cost of Capital of Firms.” Journal of Finance, Vol. 28 (03 1973), pp. 59–66.CrossRefGoogle Scholar
[9]Dyckman, T. R.; Downes, D. H.; and Magee, R. P.. Efficient Capital Markets and Accounting. Englewood Cliffs, N.J.: Prentice-Hall (1975).Google Scholar
[10]Fama, E. F. “Risk, Return and Equilibrium: Some Clarifying Comments.” Journal of Finance, Vol. 23 (03 1968), pp. 29–41.Google Scholar
[11]Fama, E. F.. Foundations of Finance. New York: Basic Books (1976).Google Scholar
[12]Fama, E. F., and MacBeth, J. D.. “Risk, Return and Equilibrium: Empirical Tests.” Journal of Political Economy, Vol. 81 (05/06 1973), pp. 607–636Google Scholar
[13]Fisher, L., and Lorie, J.. “Rates of Return on Investments in Common Stocks.” Journal of Business, Vol. 37 (01 1964), pp. 1–21.Google Scholar
[14]Fouse, W. L. “Risk and Liquidity: The Keys to Stock Price Behavior.” Financial Analysts Journal, Vol. 32 (05/06 1976), pp. 35–45.Google Scholar
[15]Fouse, W. L.. “Risk and Liquidity Revisited.” Financial Analysts Journal, Vol.33 (01/02 1977), pp. 40–45.Google Scholar
[16]Grauer, F. L. A.; Litzenberger, R. H.; and Stehle, R. E.. “Sharing Rules and Equilibrium in an International Capital Market under Uncertainty.” Journal of Financial Economics, Vol. 3 (06 1976), pp. 233–256.Google Scholar
[17]Grubel, H. G. “Internationally Diversified Portfolios: Welfare Gains and Capital Flows.” American Economic Review, Vol. 58 (12 1968), pp. 1299–1314.Google Scholar
[18]Hughes, J. S.; Logue, D. E.; and Sweeney, R. J.. “Corporate International Diversification and Market Assigned Measures of Risk and Diversification.” Journal of Financial and Quantitative Analysis, Vol. 10 (11 1975) pp. 627–637.Google Scholar
[19]Jacquillat, B., and Solnik, B. H.. “Multinationals Are Poor Tools for Diversification.” Journal of Portfolio Management (Winter 1978), pp. 8–12.CrossRefGoogle Scholar
[20]Lessard, D. R. “International Portfolio Diversification: A Multivariate Analysis for a Group of Latin American Countries.” Journal of Finance, Vol. 28 (06 1973), pp. 619–633.Google Scholar
[21]Levy, H., and Sarnat, M.. “International Diversification of Investment Portfolios.” American Economic Review, Vol. 60 (09 1970), pp. 668–675.Google Scholar
[22]Lintner, J. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” The Review of Economics and Statistics, Vol. 47 (02 1965), pp. 13–37.Google Scholar
[23]Mikhail, A. D., and Shawky, H. A.. “Investment Performance of U.S.–based Multinational Corporations.” Journal of International Business Studies, Vol. 10 (Spring/Summer 1979), pp. 53–66.Google Scholar
[24]Miller, M. H., and Scholes, M.. “Rates of Return in Relation to Risk: A Re-Examination of Some Recent Findings.” In Studies in the Theory of Capital Markets, Jensen, M. C., ed. New York: Praeger (1972).Google Scholar
[25]Ragazzi, G. “Theories of the Determinants of Direct Foreign Investment.” International Monetary Fund Staff Papers, Vol. 20 (07 1973), pp. 471–498.Google Scholar
[26]Roll, R. “A Critique of the Asset Pricing Theory's Tests; Part I: On Past and Potential Testability of the Theory.” Journal of Financial Economics, Vol. 4 (03 1977), pp. 129–176.Google Scholar
[27]Ross, S. A. “The Current Status of the Capital Asset Pricing Model.” Journal of Finance, Vol. 33 (06 1978), pp. 855–901.Google Scholar
[28]Rugman, A. M. “Risk Reduction by International Diversification.” Journal of International Business Studies, Vol. 7 (Fall/Winter 1976), pp. 75–80.CrossRefGoogle Scholar
[29]Severn, A. K. “Investor Evaluation of Foreign and Domestic Risk.” Journal of Finance, Vol. 29 (05 1974), pp. 545–550.CrossRefGoogle Scholar
[30]Sharpe, W. F. “A Simplified Model for Portfolio Analysis.” Management Science, Vol. 9 (01 1963), pp. 227–293.CrossRefGoogle Scholar
[31]Sharpe, W. F.. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance, Vol. 19 (09 1964), pp. 425–442.Google Scholar
[32]Shohet, R. “Investing in Foreign Securities.” Financial Analysts Journal, Vol. 30 (09/10 1974), pp. 55–72.Google Scholar
[33]Solnik, B. H.European Capital Markets. Lexington, Mass.: Lexington Books (1973).Google Scholar
[34]Solnik, B. H.. “Why Not Diversify Internationally.” Financial Analysts Journal, Vol. 30 (07/08 1974), pp. 48–54.Google Scholar
[35]Stehle, R. “An Empirical Test of the Alternate Hypotheses of National and International Pricing of Risky Assets.” Journal of Finance, Vol. 32 (05 1977), pp. 493–502.CrossRefGoogle Scholar
[36]Subrahmanyan, M. G. “On the Optimality of International Capital Market Integration.” Journal of Financial Economics, Vol. 2 (03 1975), pp. 3–28.Google Scholar
[37]Treynor, J. L. “How To Rate Management of Mutual Funds.” Harvard Businest Review, Vol. 43 (01/02 1965), pp. 63–75.Google Scholar
[38]Vaupel, J. W., and Curhan, J. P.. The World's Multinational Enterprises. Boston, Mass.: Harvard University (1973).Google Scholar