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Discuss the advantages and disadvantages of closed-end country funds or CECFs relative to the American Depository Receipts or ADRs as a means of international diversification.

Answer: CECFs can be employed to diversify into exotic markets which are otherwise difficult to access. Being a portfolio, CECFs (closed-end country funds) as well provide instant diversification. ADRs do not offer instant diversification; investors should make portfolios themselves. Additionally, there are comparatively few ADRs from emerging markets. The major disadvantage of CECFs is that their share prices behave somewhat such as the host country’s share prices, dropping the potential diversification benefits.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M9545023

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