Formulating global investment strategy

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Reference no: EM131543434

Rebecca Taylor, an international equity portfolio manager, recognizes that optimal country allocation strategy combined with an optimal currency strategy should produce optimal portfolio performance. To develop her strategy, Taylor produced the table below, which provides expected return data for the three countries and three currencies in which she may invest. The table contains the information she needs to make market strategy (country allocation) decisions and currency strategy (currency allocation) decisions.

Country Local Currency Exchange Rate Equity Returns

Equity Returns Returns in US Dollar

Japan 7.0% 1.0% 5.0%

United Kingdom 10.5 -3.0 11.0

United States 8.4 0.0 7.5

Rank the country for expected returns for a US-based investor.

b. Explain one advantage a portfolio manager obtains in formulating a global investment strategy, by calculating both expected market returns and expected currency returns.

c. Discuss one additional analysis that you would recommend?

Reference no: EM131543434

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