Karen K. Lewis

Karen K. Lewis
  • Joseph and Ida Sondheimer Professor in International Economics and Finance

Contact Information

  • office Address:

    2446 Steinberg-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104

Research Interests: asset pricing, international finance, macrofinance, investments

Links: CV, Personal Website



PhD, University of Chicago, 1985;  BA, University of Oklahoma, 1979


Research Associate, National Bureau of Economic Research, 1991-present.

Senior Fellow, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, 2010 – present.

Academic Positions Held

Current Positions:  Joseph and Ida Sondheimer Professor of International Economics and Finance, Finance Department, Wharton School – Primary Appointment; Professor, Economics Department, School of Arts and Sciences – Secondary Appointment

Other Positions at Wharton:  Co-Director, Weiss Center for International Financial Research, 2005-2011; Professor of Finance, 1994-present; Associate Professor of Finance, 1991-1994.

Previous appointment: Assistant Professor, Stern School, New York University, 1985-1991.

Other Positions

Olin Fellow, National Bureau of Economic Research, 1989-90; Visiting Scholar, International Finance Division, Board of Governors of the Federal Reserve System, 1987, 1991, 1995; Consultant, International Monetary Fund, 1996; Economist, First National Bank of Chicago, 1981-82.


Continue Reading


  • Fabio Ghironi and Karen K. Lewis (Working), Equity Sales and Manager Efficiency across Firms and the Business Cycle.

  • Karen K. Lewis and Edith X. Liu (2017), Disaster Risk and Asset Returns: An International Perspective, Journal of International Economics.

  • Karen K. Lewis, Bernard Dumas, Emilio Osambela (2017), Differences of Opinion and International Equity Markets, Review of Financial Studies.

  • Karen K. Lewis (2017), Changing Risk Exposures of Cross-listed Firms and Market Integration, Journal of International Money and Finance, 70, pp. 378-405.

  • Karen K. Lewis and Edith X. Liu (2015), Evaluating International Consumption Risk Sharing Gains: An Asset Return View, Journal of Monetary Economics, 71, pp. 84-98.

  • Karen K. Lewis (2011), Global Asset Pricing, Annual Review of Financial Economics, Vol 3: 435-66, 2011.

  • Karen K. Lewis (2007), Peso Problem, The New Palgrave Dictionary of Money and Finance,, 2007.

  • Karen K. Lewis (2003), What Can Explain the Apparent Lack of International Consumption Risk-sharing?, Journal of Political Economy, Vol. 104, no. 2 : 267-297, reprinted in International Financial Integration (Edward Elgar), 2003.

  • Karen K. Lewis (2000), Why Do Stocks and Consumption Suggest Such Different Gains from International Risk-Sharing?, Journal of International Economics, Vol. 52: 1-35, 2000.

  • Karen K. Lewis (1999), Trying to Explain Home Bias in Equities and Consumption, Journal of Economic Literature, Vol. 37: 571-608, 1999.


Syllabus for International Corporate Finance: Spring 2015





FNCE 731: International Corporate Finance

Spring 2015

(Preliminary – Subject to Revision)

Professor Karen Lewis Office Hours

2446 SH-DH:  Tuesday 1:30-2:55 and by appointment


Course Syllabus

Learning Objectives:


In this course, you will learn how to evaluate problems encountered by the international financial officer of a corporation, including how to:


  • Assess the company’s risk exposure due to cash flows that may be denominated in foreign currency and how to manage that risk;
  • Consider the effects of inflation differences across countries on company competitiveness and profitability;
  • Calculate to the cost of capital internationally and determine company valuations across countries;
  • Decide when to repatriate foreign cash flows in view of multiple international tax jurisdictions.


Who Would Benefit From This Class?

Studying the topics in this course, generally benefits students who are preparing for careers that either work directly with international corporations or else evaluate these corporations. For example, understanding these topics is often useful for work in:


  • Companies with operations abroad or
  • Firms that consult or work with these international companies or
  • Private equity or hedge funds that invest in these companies.


Course expectations:  In order to focus upon real world problems faced by companies, this course uses many case examples. Some of these cases require group write-ups. I present others in class to highlight issues described in the lectures. In addition, there will be two in-class midterm exams.  The calendar for these cases and exams are below as well as on Canvas.

Overall Grading:  To arrive at a final course grade, a numerical weighted average will be computed for five components: (a)  2 in-class midterm exams;  (a) 6 regular case write-ups, one of which may be dropped; (c) a capstone case write-up; (d) 3 brief “problem sets,” one of which may be dropped, and (d) course participation.

All assignments may be done with a group, or individually, according to your preference.

The numerical weighted average will be calculated as follows:

1. Midterm Exams:  40% => 20% per exam

2. Regular Write-ups (4 total after drop): 36% => 8% per case

3. Capstone Case: 12%

4. Problem Sets (2 total after drop): 5% => 2.5% per problem set

5. Class Participation:  7%


Details on these components are given below.

 1. Exams – There are two in-class midterm exams.

2. Regular Write-ups – There are 5 write-ups, typically in the form of business cases. As with actual practice in business, all of the cases are written to focus on issues, not answers, and as such may be ambiguous. There are often no “right answers” to cases, just good arguments and bad arguments for taking particular actions or decisions. There is sometimes a limited amount of quantitative information on which to make a decision and thus it may be impossible to compute a precise numerical answer. The lowest grade will be dropped and you may therefore choose not to turn in one assignment.

3. Capstone Case – There will be an extended write-up at the end of the class to pull together the topics you will have learned throughout the semester. Therefore this case cannot be dropped.

4. Problem Sets On days when I present a case, a “problem set” answering a few short questions will be assigned. These assignments will be given an overall grade category of “check” – satisfactory, “check +” – superior, and “check -” – below average.  The lowest grade for the problem set assignments will be dropped and you may therefore choose not to turn in one assignment.

4. Class participation:  There are two components to the participation grade.  (a) Attendance:  Attendance counts two-thirds towards the participation grade.  It will be taken every class discussion day and possibly on a random basis on other days.  Attendance is taken promptly at the beginning of the class.  If you are late to class, it is your responsibility to let me know at the end of that class period that you were late.  (b)  Discussion:  A discussion grade will count one-thirds towards the participation grade.  The discussion grade will depend upon the willingness of students to give answers when called upon (whether right or wrong) and also willingness to volunteer to help discuss case questions.  A participation grade will be posted twice a semester on Canvas as “check”,  check+, and check -.

Groups Groups will be formed through the IEMAV site (accessible through Canvas).  The group sign-up procedure will be covered in detail during class.  Generally, students prefer to form a group early in the semester and keep with that group throughout.  Nevertheless, students sometimes prefer to submit assignments individually or to join a different group during the course of the semester.  These changes are straightforward through the IEMAV site and do not require permission from me.  The maximum number of students permitted in a group is 4.

Course Materials, Submissions, and Other Basic Information:

All course materials will be accessible through the Canvas site.  All submissions will be done on the IEMAV site (accessible through Canvas).  The table below summarized the due dates and submission buttons on IEMAV.


Assignment Type Due Date*

Submission Location

  1. GE Toys

Simulation* &Write-up

Feb 4


  1. Livingston Chemicals

Simulation* &Problem Set

Feb 11


  1. Expose’ and Jaguar

Simulation* &Write-up

Feb 18


Midterm #1

In Class Exam

Feb 25


  1. Royal Dutch Shell

Problem Set

Mar 18


  1. Foreign Company Analysis

Presentation & Spreadsheet

Mar 25



  1. Hozho


Apr 1


  1. Globalizing the Cost of Capital at AES

Problem Set

Apr 8


Midterm #2

In Class Exam

April 15


  1. The Return of LaFarge (Capstone Case)


Apr 29


* 10:30 AM except for simulations which are due 8:30 AM


Reading material:

a.  Cases:  All copywrighted cases are available for purchase in a bulkpack at Wharton Reprographics through Study.Net. All non-copywrighted cases are available on Canvas.

b. Lecture Notes (labeled “My Notes” or MN below), Slides, Additional Reading:  All these material are posted on Canvas.  Slides will be posted prior to the class in which they are discussed.

Prerequisites: A thorough knowledge of Corporate Finance (FNCE 611 or FNCE 612) is assumed.

Re-grade procedure:

1. Please write a brief explanation of why you believe a question on your assignment was improperly graded. Send an email to me with this explanation. The assignment will be reviewed by the TAs and me. I will then inform you about whether the grade is has been changed and the reason why.

2. Requests for regrades may be submitted to me only up to two weeks after the graded assignment or exam has been returned to your mailfolder.

3. Please note that regrades sometimes result in lowering the grade when it appears that some credits were not deserved.


Course Topics by Class

Note:  For Class numbers, please see class calendar.


Part 1:  International Cash Flow Risk and Exchange Rate Hedging

Module 1. Overview:  Exchange Rates and Cash Flows

Class Number: 1- Overview

Readings: My Notes (MN), Chapter 1

Module 2: Interest Parity and Hedging Single Cash Flows

Class Numbers: 2 to 3  Interest Rate Parity and Standard Hedging with Forwards

Readings: MN, Chapter 2

Class Numbers: 4 – Standard Hedging with Options

Readings: MN, Chapter 3

Class 6. GE Toys Case Discussion  


Module 3: Hedging Multi-Period Cash Flows

Class Numbers: 5 – Hedging Multi-Periods

Readings: MN, Chapter 4

Class 8. Livingston Chemical Case Discussion

Module 4: Real Exchange Rate Risk and Exposure

Class Numbers: 7 – PPP and Real Exchange Rate Risk

Readings: MN, Chapter 5

Class Numbers: 9 – Exchange Rate Exposure

Readings: MN, Chapter 6

Class 10. Expose’#1 (Jaguar) Case Discussion

Module 5:  IN CLASS MIDTERM – Part 1 Summary

Class 11. Midterm Review

Readings:  Old Exams on Canvas

Class 12. MIDTERM 1:  In class 

Part 2: Valuing Cash Flows Across Borders

Module 6:  Shareholders Risk

Class Numbers: 13 & 14: International Portfolio Risk

Readings: MN, Chapter 7

Class 16. Royal Dutch and Shell Case Discussion

Class 18.  Foreign Company Class Presentations


Module 7:  Tax planning and intra-corporate fund flows

            Class Number 15 & 17:  International taxes Lecture

Readings: MN, Chapter 8

Optional Readings:  Baker, J. C., International Finance, chapter 17: “Taxation of International Operations”.

Class 20. Hozho Case Discussion


Module 8:  International Cost of Capital

            Class Number 19:  International cost of capital Lecture

Readings:  MN, Chapter 9

Class 22. Globalizing Cost of Capital AES Case Discussion


Module 9:  International Capital Budgeting and Valuation

Class Numbers: 21- 24:  International Budgeting and Valuation Lectures

            Readings:  MN, Chapter 10

Optional Readings:  Dumas, B., “Capital Budgeting: an Analytical Framework,” classnote, February 2002.


Module 10:  Assessing Country and Sovereign Risk

Class Numbers: 25-27  Country and Sovereign Risk Lecture

Readings:MN, Chapter 11

Lessard, D. R., “Incorporating Country Risk in the Valuation of Offshore Projects,” Journal of Applied Corporate Finance, 1996, 52-63.


Module 11:  TAKE HOME MIDTERM – Part 2 Summary

Class 28. LaFarge Acquires BCI Case Discussion



Past Courses

  • FNCE208 - International Corporate Finance

    Analyzes financial problems corporations face that result from operating in an international environment. Major topics include managing exchange risk through hedging and financing, measuring exchange rate exposure, calculating the cost of capital for foreign operations, assessment of sovereign risks, capital budgeting from a project and parent perspective, and international taxation.

  • FNCE719 - International Financial Markets

    FNCE 719 is a course on international financial markets. Major topics include foreign exchange rates, international money markets, currency and interest rate derivatives (forwards, options, and swaps), international stock and bond portfolios, and cryptocurrencies. Students learn about the features of financial instruments and the motivations of market participants. The class focuses on risk management, investing, and arbitrage relations in these markets.

  • FNCE731 - International Corporate Finance

    This course analyzes financial problems corporations face that result from operating in an international environment. Major topics covered are corporate strategy and the decision to invest abroad, international portfolio diversification, managing exchange risk, taxation issues, cost of capital and financial structure in the multinational firm, and sources of financing. Departmental Website: https://fnce.wharton.upenn.edu/ Registration: Registration for MBA electives is handled through the MBA Course Auction. For questions about core courses or MBA electives that don't appear in the course auction please contact the MBA Program Office. Non-MBAs interested in graduate classes must work throught the academic department and the MBA Program Office.

  • FNCE893 - Policy Decisions by Central Banks: The Fed, the ECB and the BOI

    This course aims to provide the future global manager and financial analyst with the knowledge on policies set by central banks, regulators and governments to reach the goals of price and financial stability as well as support of growth and employment. The core of the course connects between the formal and actual goals that central banks follow and the related economic analysis on which the goals and the policies are set. We will explain the economic rationale for the policy prescriptions to reach the goals and how these are implemented using institutional framework in the US, the European Central Bank (ECB), Israel and remarks on other countries. We use data, current events and events of the 2007-2013 financial crisis as a basis for discussion and assignments. All these are aimed at understanding how and why the Federal Reserve of the US (the Fed), The bank of Israel (BOI) and the European Central Bank (ECB) set their policies and how that is related to academic research on these issues.

  • FNCE899 - Independent Study Project in Finance

    Independent Study Projects require extensive independent work and a considerable amount of writing. ISP in Finance are intended to give students the opportunity to study a particular topic in Finance in greater depth than is covered in the curriculum. The application for ISP's should outline a plan of study that requires at least as much work as a typical course in the Finance Department that meets twice a week. At a minimum, we need a description of the methodology you intend to employ, a bibliography and description of the data that you will use as well as a list of interim deliverables and dates to ensure that you complete the project within the semester. Applications for FNCE 899 ISP's will not be accepted after the THIRD WEEK OF THE SEMESTER. You must submit your Finance ISP request using the Finance Department's ISP form located at https://fnce.wharton.upenn.edu under the Course ISP section

In the News

Knowledge @ Wharton


Latest Research

Fabio Ghironi and Karen K. Lewis (Working), Equity Sales and Manager Efficiency across Firms and the Business Cycle.
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In the News

Research Roundup: Foreign Diversification, Social Comparisons and Consumer Identity

Is investing in foreign stocks still a good strategy for offsetting risk and boosting returns in your portfolio? How do social comparisons impact the different dimensions of trust that people can have for each other? How can companies use emotional cues to convey a particular identity to consumers? Wharton professors Karen Lewis, Maurice Schweitzer and Patti Williams, respectively, examined these issues -- and what they mean for business and consumers -- in recent research papers.

Knowledge @ Wharton - 2013/05/8
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