Ch013 International Equity Markets.docx

1、Ch013 International Equity MarketsEun & Resnick 4eCHAPTER 13 International Equity MarketsA Statistical PerspectiveMarket Capitalization of Developed CountriesMarket Capitalization of Developing CountriesMeasures of LiquidityMeasures of Market ConcentrationMarket Structure, Trading Practices, and Cos

2、tsInternational Equity Market BenchmarksiShares MSCIInternational Finance in Practice: Foreign Interest in South Africa Takes OffTrading in International EquitiesCross-Listing of SharesYankee Stock OfferingsThe European Stock MarketAmerican Depository ReceiptsGlobal Registered SharesFactors Affectin

3、g International Equity ReturnsMacroeconomic FactorsExchange RatesIndustrial StructureSummaryMINI CASE: San Picos New Stock ExchangeA Statistical Perspective1A “primary” stock market isa)A big internationally-important market like the NYSEb)A market where corporations issue new shares to initial inve

4、storsc)Where brokers and market makers traded)None of the aboveAnswer: b)Market Capitalization of Developed Countries2The market cap of the developed worlda)Is about 90 percent of the market cap of the entire worldb)Is about 80 percent of the market cap of the entire worldc)Is about 70 percent of th

5、e market cap of the entire worldd)Is about 60 percent of the market cap of the entire worldAnswer: a)Market Capitalization of Developing Countries3In general, Standard & Poors Emerging Markets Data Base classified a stock market as “emerging” ifa)It is located in a low- or middle-income economy as d

6、efined by the World Bankb)Its investable market capitalization is low relative to its most recent GNI figuresc)a) or b)d)none of the aboveAnswer: c)4Investment in foreign equity markets a)Is a real “backwater” in financeb)Became common practice in the 1980s as investors diversified their portfolios.

7、c)During the 1980s was largely confined to the developed worldd)All of the aboveAnswer: d)5In mutual funds, investment in emerging foreign equity markets a)Represents less than one percent of investments in U.S.-based mutual funds.b)Represents about five percent of investments in U.S.-based mutual f

8、unds.c)Represents more than twenty percent of investments in U.S.-based mutual funds.d)Declined during the 1990sAnswer: a)Measures of Liquidity6Which investment is likely to be the most liquid:a)A share of publicly traded company trading on the NYSE.b)A bond issued by a Fortune 500 company.c)A house

9、 in a nice part of town.d)a) and b) are equally liquidAnswer: a)Rationale: bonds really arent that liquidespecially when compared to stocks.7A measure of “liquidity” for a stock market isa)the turnover ratiob)the ratio of stock market transactions over a period of time divided by the size, or market

10、 capitalization, of the stock marketc)the LIBOR rated)a) and b)Answer: d) 8As a measure of “liquidity” a)Generally, the lower the turnover, the greater the liquidity of a secondary stock market.b)Generally, the higher the turnover, the greater the liquidity of a secondary stock market.c)The more a f

11、inancial asset gurgles when shook the greater the liquidityd)None of the aboveAnswer: b)9Many of the small foreign equity markets (e.g. Chile, Sri Lanka)a)Have poor liquidity at present.b)Are very liquid stock markets, since the poor people living there are eager to sell their securities.c)Have fair

12、ly high turnover ratios indicating strong liquidity.d)None of the aboveAnswer: a)10In general if an investmenta)Has poor liquidity it should offer investors a liquidity premium.b)Can be sold fairly quickly at a fair price, it has good liquidity c)a) and b)d)None of the aboveAnswer: c)11Many of the l

13、arger foreign equity markets (e.g. Korea, India)a)Have poor liquidity at present.b)Are very liquid stock markets, since the poor people living there are eager to sell their securities.c)Have high turnover ratiosd)None of the aboveAnswer: c)Measures of Market Concentration12The more concentrated a na

14、tional stock market isa)The greater opportunity a global investor has to include shares from that county in an internationally diversified portfolio.b)The less opportunity a global investor has to include shares from that county in an internationally diversified portfolio.c)The broader the investor

15、base across a number of different shares and industries.d)None of the aboveAnswer: b)Market Structure, Trading Practices, and Costs13The secondary stock marketsa)Are the markets for “pre-owned” or “used” shares of stockb)Provide marketability to shares.c)Provide price discovery or share valuation.d)

16、All of the aboveAnswer: d)14Price discovery in the secondary stock marketsa)Occurs due to the competitive trading between buyers and sellers, just like on eBay.b)Is set once a day at the close.c)Is set by the investment bankers at the IPO.d)All of the aboveAnswer: a)15A market ordera)Is an instructi

17、on from a customer to a broker to buy or sell at the best price available when the order is received (immediately)b)Is an instruction from a customer to a broker to buy or sell in a particular market (e.g. NYSE).c)Is always and everywhere “fill or kill”.d)Is always and everywhere “good till cancelle

18、d”.Answer: a)Rationale: c) and d) are tempting, but you should always be suspicious of answer choices that include “always and everywhere”theres got to be an exception sometimes or somewhere.16A limit ordera)Is an instruction from a customer to a broker to buy or sell in at a particular price (or be

19、tter)b)Can be a “day order”that is the order is cancelled if not executed during that days trading.c)Can be “good till cancelled”.d)All of the aboveAnswer: d)17Dealers in an OTC marketa)Stand ready to buy at the bid and sell at the ask price.b)Set their own bid and ask pricesc)Do not charge commissi

20、onsd)All of the aboveAnswer: d)18The OTC marketa)Does not accept credit“only take cash”b)Is a dealer marketc)Includes the NASDAQ in the U.S.d)b) and c)Answer: d)19A “specialist”a)Makes a market by holding an inventory of a particular security, like IBM or Intel, b)Is a participant on the floor of th

21、e exchange, like the NYSEc)Has a designated station on the floor of the exchanged)All of the aboveAnswer: d)20A crowd of floor traders on the NYSEa)May arrive at a more favorable price for their clients “inside” the specialists bid and ask quotes.b)Are obliged to execute their trades through a speci

22、alist.c)Are allowed to “front run” their own trades ahead of customer trades.d)All of the aboveAnswer: a)21A specialist on the NYSEa)Is obliged to fill limit orders if they are more favorable than the specialists posted bid and ask quotes.b)Is obliged to fill limit orders at the specialists posted b

23、id and ask quotes.c)Is actually a computer program, not a humand)a) and c)Answer: a)22A “call market”a)Is OTC and over-the-phoneb)Features an agent of the exchange that accumulates a batch of orders that are periodically executed by written or verbal auction throughout the day.c)Provides traders wit

24、h execution at certain prices.d)b) and c)Answer: b)23The Toronto Stock exchangea)Is a fully automated b)Features electronic matching of public ordersc)Has continuous order flowd)All of the aboveAnswer: d)24“Call market” and “crowd trading” take place on a)a non-continuous exchange trading systemb)a

25、continuous trading exchange systemc)non-continuous markets and continuous markets, respectivelyd)continuous markets and non-continuous markets, respectivelyAnswer: a)25Comparing agency versus dealer markets, which combination of the following statements is true: (i)- In a “dealer market,” the broker

26、 takes the clients order through the agent, who matches it with another public order. (ii)- In an “agency market,” the broker takes the trade through the dealer, who participates in trades as a principal by buying and selling the security for his own account.(iii)- In an “agency market,” the broker

27、takes the clients order through the agent, who matches it with another public order. (iv)- In a “dealer market,” the broker takes the trade through the dealer, who participate in trades as a principal by buying and selling the security for his own account. (v)- An agent can be viewed as a “brokers b

28、roker.”(vi)- A dealer can be viewed as a “brokers broker.”a)(i), (ii), and (v)b)(i), (ii), and (vi)c)(iii), (iv), and (v)d)(iii), (iv), and (vi)Answer: c)International Equity Market Benchmarks26A market-value indexa)Is calculated such that the proportion of the index a stock represents is determined

29、 by its proportion of the total market capitalization of all stocks in the index.b)Is calculated as the average price of all the stocks in the index that trade that day, one example is the NASDAQ.c)Is calculated like the DJIAd)None of the aboveAnswer: a)iShares MSCI27iShares MSCI are: a)Exchange tra

30、ded funds that are subject to U.S. SEC and IRS diversification requirements.b)Open-end mutual funds sold OTC.c)Exchange traded funds that are NOT subject to U.S. SEC and IRS diversification requirements.d)None of the aboveAnswer: a)Trading in International EquitiesCross-Listing of Shares28A firm may

31、 cross-list its share to: a)establish a broader investor base for its stockb)establish name recognition in foreign capital markets, thus paving the way for the firm to source new equity and debt capital from investors in different marketsc)expose the firms name to a broader investor and consumer groupsd)All of the aboveAnswer: d)29Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and managementa)By moving to a better countyb)By listing their stocks in countries with strong investor