Country risk can reduce the expected return on an investment and must be taken into consideration whenever investing abroad. Some country risk does not have an effective hedge. Other risk, such as exchange rate risk, can be protected against with a marginal loss of profit potential.
The United States is generally considered the benchmark for low country risk and most nations can have their risk measured as compared to the U.S. Country risk is higher with longer term investments and direct investments, which are investments not made through a regulated market or exchange.
Investment dictionary. Academic. 2012.
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