Which of the following is a valid reason for the need for float adjustment in the construction of international equity benchmarks as compared to US equity benchmarks?
A) The proportion of free float of market capitalization is higher for international equity benchmarks as compared to US equity benchmarks. B) The proportion of free float of market capitalization is lower for international equity benchmarks as compared to US equity benchmarks. C) The crossholding of the benchmark in the US is lower than the crossholding in international markets.
Free Float may be similar and in fact depends on the company , international or US. But cross holding is a company culture widely prevalent internationally , especially in Asia , and minimal and heavily regulated ( holding levels above 5% must be reported ) in the US.
The proportion of free float (amount of shares actually available for trading) is lower for international equity markets necessitating float adjustment. Crossholdings of company shares (not the benchmark) is one factor contributing to lower float in international markets.