An Examination of the benefits of Investing in Foreign Equities
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As globalization increases more attention has moved to foreign markets as investors look for additional gains and diversification. Emerging markets are popular because of the low correlation with other assets. Many investors expect higher returns from emerging markets due to the high risk attracted to them. When the correlation, mean return, standard deviation, and coefficient of variation emerging and other foreign assets are compared to other assets investors can determine what investment style will fall in line with the risk they are willing to take. The data from 1988-2006 shows that correlation between foreign equities has become more correlated over time, which will lower the diversification benefits of investing in them.