Global Sourcing - Defining Global Capital Market Opportunities close - Essay Example

p.). As such, global sourcing of capital could be described as a practice of sourcing funds from the global market/fund through the use of financial instruments such as stocks, mutual funds and engaging services of intermediaries. All investments have risks, and these are described as the systematic risk and unsystematic risks. Systematic risks are those risks that could not be diversified or eliminated, usually a big event that will set off a loss of economic value or confidence in the financial system.

Examples are war, inflation, fluctuations of interest that affect the entire economy. Unsystematic risks are those belonging to the company alone. Examples are fires, natural disasters, or falling of sales. Risks in investments could not be eliminated, however, systematic risks could be measured and expected market returns are calculated through statistical method of regression analysis. Regression analysis makes use of Beta coefficient. A Beta coefficient is a measure of volatility that says, “a beta of 1 means that the security’s price will move with the market; less than 1 means that the security price will be less volatile in the market, and a beta of more than 1 indicates that the security’s price will be more volatile in the market” (Investopedia, n. p.).

A beta >1 scheme offers greater returns but at the same time presents more risks. Example: high-tech stocks have a beta >l, while utilities have