PAPER REQUIREMENTS

INTERNATIONAL PORTFOLIO INVESTMENT DUE: December 9, 2020

Length: Three page executive summary plus graphs and data from spreadsheet in an Appendix.

Paper focus: Analyze the feasibility of international portfolio diversification. Would you diversify internationally? Examine the lowest risk portfolio and the notion of risk and return. Calculate the Sharpe performance measure for each market examined.

GRADING CRITERIA

The papers will be graded on a number of criteria. Among these are:

1. Content: complete set of references are important.

2. Logical progression: see Writing Guide.

3. Presentation of the tables, figures, and data. They should be presented in a professional manner. See Writing Guide!

4. Writing style and whether the writing guidelines were met.

DIRECTIONS

Your paper should have an introduction, literature review, body and results, and conclusion. You should take your paper and instructions to the Writing Center before you submit your paper.

Introduction

Your introduction should include the following:

1. Importance of international diversification to a domestic portfolio.

2. Potential impact of risk and return to a domestic portfolio.

3. Explain what you will do in the rest of the paper.

Literature Review:

Use the library’s sources to summarize academic research into international diversification. Benefits and costs of international diversification should be addressed.

Body and Results:

The following should be addressed:

1. What data sources did you use?

2. Discuss the correlations between your stock market, the U.S. stock market, and the exchange rate.

3. Discuss the Sharpe index and for your country and the U.S. market.

4. Discuss the graph for your efficient frontier. Details are shown below.

5. How do your result compare with your literature review?

Graph Construction:

Create a graph between the standard deviation (risk) and return of an international portfolio consisting of the U.S. (S&P 500) and your country’s index adjusted for the exchange rate (U.S. dollar returns).

Use the following equations:

Equation 1: rp = arUS + (1-a)rEAFE

where r = average rate of return on equity over the period;

p = portfolio;