1. Achieving International Diversification with U.S. Multinational Equities BA453 ․ Professor Harvey February 26, 1999 Rain Man Asset Management Rob Christensen Monte Combe Jeff Kip Mike McDuffie Amjad Muasher

2. Company Selection 150 largest U.S. equities (by market cap) with returns from 1/93 to 12/98 Sorted into three portfolios (high, middle, low) by ratio of foreign sales to total sales

3. Company Selection Selection problems - Traceability of foreign revenue - Industry selection bias Industries removed from sample: - Financial services except for insurance - Utilities - Telecommunications

4. Tests for Diversification Benefits

7. Selection Bias Each portfolio beats the U.S. equity return “winner’s bias” from selecting only largest market capitalization equities

8. Conclusion No diversification from buying “diversified” U.S. Equities