1. Chapter 19 – Int’l Stock Markets Globalization and Trading Overseas Multiple Listings U.S. Stocks on Foreign Exchanges Foreign Stocks on U.S. Exchanges American Depository Receipts (ADRs) International Depository Receipts (IDRs) Diversification and Foreign Stocks Correlation Coefficients Diagram of -1, 0, +1 Correlations between two risky assets

2. Chapter 19 – Int’l Stock Markets International Exchanges United Kingdom (England) London – LSE Regionals Consolidated in 1980s Dublin Stock Exchange started in 1995 FTSE (Footsie) 100 – Major Stock Index Germany Major Stock Exchange – Frankfurt (FSE) Seven Independent Regionals Bank controlled – buying and selling is a bank transaction

3. Chapter 19 – Int’l Stock Markets European Developments The central idea Pan-Europe (One market for all of Europe) Trading on many floors with one system The hang-up Ownership Regulations on Trading Electronic Trading System Connections to the U.S. Markets Nasdaq and NYSE

4. Chapter 19 – Int’l Stock Markets International Exchanges Japan Tokyo Exchange (TSE) Six Locations – Tokyo, Osaka, Nagoya, Kyoto, Fukuoka, and Sapporo Zaraba Method – Saitori Members China Still Rudimentary Government Controlled A-Market and B-Market

5. Chapter 19 – Int’l Stock Markets Exchange Characteristics Ownership Private to Government Trading Agents Broker/Dealer to Government Controlled Trading Procedures Continuous or Call, Electronic or Out-Cry Regulations Self-Regulating Organizations to Government Controlled

6. Chapter 19 – Int’l Stock Markets Global Depository Receipts - GDRs Shares issued by a financial institution (bank) Share value based on the underlying security of a firm in a foreign country Shares meet local government regulations “Mutual Fund” type trading Shares issued receive “dividend” pass-throughs Shares information is pass-through via disclosures in original country reports to local country language ADRs – American Depository Receipts Shares Trading on U.S. Exchanges

7. Chapter 19 – Int’l Stock Markets Indexes of Performance Some Daily Measure of the General Performance of Stocks Different Mechanics Different Stocks Different Weights Movement to “Free-Float” Shares that are available for public trading Target date is June 2002