Multinational companies, international portfolio diversification are known to offer more opportunities than a domestic portfolio. Further, they have more stable returns despite having more diffuse risk. Required: A. What factors are responsible for the recent surge in international portfolio investment? B. Explain the main barriers to international portfolio diversification. C. Discuss the advantages and disadvantages of investing in emerging economies.

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Factor Models

Many attributes might be related to an asset's risk, including market capitalization (size), dividend yield, growth, price-earnings ratio, etc. The use of these traditional descriptors, however, presents a few problems: