Since 1990 there has been a tremendous growth in the investment in international mutual funds. This growth is likely to continue as domestic stock market cools down and more U.S. investors seek higher returns as well as the diversification benefits of foreign assets. Investors are also attracted to international funds in the belief that such funds earn abnormally high returns because of the previous relative inefficiency in those markets. This study examines the annual risk-adjusted returns using Sharpes Index for ten portfolios of international mutual funds for the period September 2000 through September 2006. The international funds were analyzed by combining the funds into individual portfolios based on sector, geographics and company size. The benchmarks for comparison were the U.S. mutual fund performance reported by MorningStar. The risk-adjusted returns were then determined and compared to each other and to the U.S. market. During this period, nine out of ten of the international mutual fund portfolios outperformed the U.S. market. The portfolio that contained all International Mutual Funds (IMF) significantly outperformed on a risk-adjusted basis the fund that was made up of all of the U.S. stock mutual funds, (All U.S. Stock Funds- USSF). Additionally, the Foreign Small Value (FSV) portfolio, Foreign Small Growth (FSG) portfolio, Emerging Markets (EM) portfolio, Latin America (LA) portfolio, and the Pacific Asia without Japan (PA-J) portfolio all had average annual returns (not adjusted for risk) that exceeded USMFs returns by more than 10 percent.
<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: "Times New Roman","serif"; font-size: 10pt;">The purpose of this paper is to explore the theoretical structure that underlies the valuation process for small closely held firms.<span style="mso-spacerun: yes;"> </span>Specifically, cost of capital estimate methods which appear in the current literature are examined, and a theoretically correct and simple method to measure cost of equity capital for privately held companies is offered.<span style="mso-spacerun: yes;"> </span></span></p>
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