Trying to review for finals coming up, and wanted to see what you think the right answer would be to this question Thank you!

1. Consider a world where there are only two countries: one is very large (in population) and the other is very small. The residents of both countries have the same income (and wealth) per person, and there are the same number of firms per person in both countries. Also, assume that all firms have the same book value. Before, there was no home bias and investors in both countries bought stock of firms located in both countries. But now there has been a diplomatic incident and the governments of both countries order their residents to sell their holdings of firms located in the other country. That is, residents are now only allowed to hold shares of firms located in their own countries. How do you predict this change will affect the stock prices of firms in these countries (in the long run)? How does your answer differ for the firms located in the very large versus the very small country?