FINS3630 Lecture Notes - Lecture 8: Modern Portfolio Theory, Capital Market, Financial Market

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As impediments to capital market mobility fall, correlations likely to increase in future. Trade in american depositary receipts (adrs) or global depositary receipts (gdrs) Chapter 16: corporate strategy and foreign direct investment. 3 strategies: the innovation-based mnc, the mature mnc. Economies of scope: the senescent mnc. Role of rationalization and integration: fdi and survival. Country-specific perspective focuses on country from top-down view, i. e. , macroeconomic variables to industry-specific analysis. Definition: export of savings by nation"s citizens because of safety-of-capital fears. Controlled exchange rate system: currency usually overvalued. Wasteful government spending: inability to service foreign debt. Resource base: lack of strong work ethic. Country risk and adjustment to external shocks. Existence of government-imposed barriers to market forces. Lessons - economic reforms that work have: Sold program to all levels of society. Sequence: start with exporting, then move on the foreign sales subsidiary, then licensing, then foreign production. The risk exposure you encounter gradually gets higher.

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