Page 37 - Demo

%u062c%u0645%u064a%u0639 %u0627%u0644%u062d%u0642%u0648%u0642 %u0645%u062d%u0641%u0648%u0638%u0629 %u0640 %u0627%u0625%u0644%u0639%u062a%u062f%u0627%u0621 %u0639%u0649%u0644 %u062d%u0642 %u0627%u0645%u0644%u0624%u0644%u0641 37 %u0628%u0627%u0644%u0646%u0633%u062e %u0623%u0648 %u0627%u0644%u0637%u0628%u0627%u0639%u0629 %u064a%u0639%u0631%u0636 %u0641%u0627%u0639%u0644%u0647 %u0644%u0644%u0645%u0633%u0627%u0626%u0644%u0629 %u0627%u0644%u0642%u0627%u0646%u0648%u0646%u064a%u0629Solution:The expected return of the equally weighted local portfolio is: E(Rp) = (.5)(18%) + (.5)(20%) = 0.19The variance of the local portfolio is:Var (Rp) = (.5)2(14%)2 + (.5)2(12%)2 +2(.5)2(14%)(12%)(.90)= 0.0161The standard deviation of the local portfolio is thus =%u221a0.0161 = 0.127%uf06c Sharpe Ratio for the expected local portfolio= Rp%u2212Rf = 19%- 7% = 0.94%u03c3p 0.127The expected return of the equally weighted international portfolio is: E(Rp) = (.5)(18%) + (.5)(19%) = 0.185The variance of the international portfolio is:Var (Rp) = (.5)2(14%)2 + (.5)2(15%)2 +2(.5)2(14%)(15%)(.10)= 0.0074The standard deviation of the international portfolio is thus =%u221a0.0074 = .086%uf06c Sharpe Ratio for the expected international portfolio=Rp%u2212Rf = 18.5%- 7% = 1.34%u03c3p 0.086The previous example shows that although the return of a local stock is higher and the risk is lower than those of an international stock, the low correlation between the investor's local stock and the international stock has achieved the advantages of international portfolio diversification, which is a lower risk of the international portfolio and a higher Sharpe index.Despite the advantages that international portfolio diversification can do, there are several risks that must be taken into consideration when building these portfolios internationally.