Multinational Corporations and International Diversification Benefits

Many investment consultants suggest that investors can diversify portfolio holdings locally by investing in multinational corporations (MNCs) to gain international diversification benefits. The rationale is that if an MNC can be regarded as a portfolio of international activities, its operating and financial performance should reflect its worldwide activities instead of factors solely related to the country where its headquarters are located or where its stock trades.

Read the following three articles and answer the questions:
Why Global Diversification MattersPreview the document, by Anthony Davidow

How to Invest in The RestPreview the document, by Ian Prior

Why U.S. Multinational Companies Don’t Provide International Diversification Benefits (Links to an external site.), by Larry Swedroe


Can MNCs provide international diversification benefits for investors? Can MNCs be used as a substitute for investing directly in companies in foreign countries? Clearly state your rationale to defend your responses. Your answers are limited to no more than eight sentences.

Sample Solution