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Nuvama hedge fund is looking to create a stable / less risky international portfolio. Analysts at Nuvama collect the following data on India. Indian stock
Nuvama hedge fund is looking to create a stable less risky international portfolio. Analysts at Nuvama collect the following data on India. Indian stock returns have a volatility of and INR$ returns have a volatility of Indian currency returns and Indian stock returns in INR terms have a very high correlation of The correlation between Indian equity return measured in dollar terms and the US stock market return is Which of the following is true?
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Dollar returns for Indian equity markets will be substantially more volatile than the volatility of Indian equity markets for the Indian investors as INR$ exchange rate has very high volatility.
Dollar returns for Indian equity markets will be substantially more volatile than the volatility of Indian equity markets for the Indian investors as INR$ exchange rate has very high volatility and the currency and equity returns for India are highly correlated.
Even if Indian equity market returns in dollar terms are very risky for a US investor, a portfolio of Indian and the US equities can exhibit low volatility and better Sharpe ratios.
Both A and C
Both B and C
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