There are potential benefits and risks from raising capital on global markets. Discuss the pros and cons in terms of risk of raising capital on global markets

What will be an ideal response?

Answer: A portfolio of international stocks represents a portfolio in which foreign securities have been added. It has the same overall risk shape as the U.S. stock portfolio, but it has a lower portfolio beta. This means that the international portfolio's market risk is lower than that of a domestic portfolio. This situation arises because the returns on the foreign stocks are not perfectly correlated with U.S. stocks (the benefits of international diversification).
The foreign exchange risks of a portfolio, whether it is a securities portfolio or the general portfolio of activities of the MNE, are reduced through international diversification. But international portfolio construction is also different in that when the investor acquires assets or securities from outside the investor's host-country market, the investor may also be acquiring a foreign currency-denominated asset. Thus, the investor has actually acquired two additional assets–the currency of denomination and the asset subsequently purchased with the currency–one asset in principle, but two in expected returns and risks. You should see, however, that the presence of currency risk may alter the correlations associated with securities in different countries and currencies.