Case | HBS Case Collection | March 2004 (Revised October 2013)

Innocents Abroad: Currencies and International Stock Returns

by Mihir A. Desai, Kathleen Luchs, Elizabeth A. Meyer and Mark Veblen


What do international stocks contribute to the portfolio of a U.S. investor? How do currencies interact with stock price movements in determining the benefits of international diversification? This case helps students compare the risks and returns of foreign stock markets with each other and with the U.S. market and to examine the risks and returns of international diversification. Students must calculate returns, adjust for currencies, derive correlations, and map efficient frontiers based on raw data. To obtain executable spreadsheets (courseware), please contact our customer service department at

Keywords: diversification; international CAPM; CAPM; home bias; international finance; currency risk; exchange rate risk; international stock market returns; stocks; risk and uncertainty; investment return; financial services industry; United States; emerging markets; currency; investment portfolio; Currency Exchange Rate; Stocks; Financial Markets; International Finance; Investment Return; Currency; Risk and Uncertainty; Emerging Markets; Investment Portfolio; Financial Services Industry; United States; Australia; Canada; China; Germany; India; Japan; United Kingdom;


Desai, Mihir A., Kathleen Luchs, Elizabeth A. Meyer, and Mark Veblen. "Innocents Abroad: Currencies and International Stock Returns." Harvard Business School Case 204-141, March 2004. (Revised October 2013.)