Of the following countries, which one best tends to diversify across borders: *

a. Hong Kong

b. United States

c. Canada

d. Sweden

One reason why a country might want to consider investing more in international markets is: *

a. the transactions costs of doing so are low

b. they can diversify their risk portfolio

c. they are always less risky

d. they always provide better returns

Why might one be skeptical of the argument that transactions costs are preventing so many people from investing abroad? *

a. transactions costs are not a real phenomena

b. historically, transactions costs have been very high

c. empirically, transactions costs are not prohibitive at the margin

d. people who are wealthy can afford to pay transactions costs

One reason to be skeptical of avoidance of double taxation as a reason why people don’t invest more abroad is that: *

a. double taxation is not a problem in most places

b. many countries who don’t tax capital gains still have a home bias

c. it is very easy to avoid the problem of double taxation

d. double taxation is prohibited by international treaties

Which of the following is NOT an explanation that has been given for why people might have home bias when it comes to investments: *

a. Overconfidence in their home country

b. they already have sufficiently diversified portfolios

c. they fear double taxation

d. they think transactions costs will be prohibitively high