Another poor question. investment, following, question, domestic, exchange

segalm

George Go, CFA, a U.S. domestic investor, wishes to diversify his domestic portfolio. Which of the following investment alternatives offer the lowest diversification benefit primarily because of its high correlation to U.S. markets?
A) Closed-end country funds.
B) American Depository Receipts.
C) Exchange Traded Funds.

Answer is A which I put, but how can C not have a high correlation with the US exchange?

iteracom

It says no where they are international exchange traded funds...

troymo

Ok, can someone explain to me why the answer isn't B?

NO EXCUSES

FinancialAnaly

Assuming that fundamentals is what drives the stock up/down, a tanking US market will not directly affect the company's performance/operating results in their local market.

comp_sci_kid

Since ADRs are listed on the US exchange, they are subject to the US investor's risk appetite. Today was a great example of this. Look at Chinese ADRs for example and see the dip around 3PM. That's not related to the Chinese companies fundamentals, but US investors... and when the market in China will open, the prices will converge.