Definition: International Equity includes index funds, mutual funds, or other types of funds which invest only in non-U.S. stocks (and not bonds). International equities can be further classified into 'developed' and 'emerging' markets.
Investment Case: International stocks have historically offered diversification potential for a portfolio of US stocks and may offered lower relative valuations by some measures. Additional they provide geographic diversification at a minimum in a global based economy.
Cost: The cost for the investing in international equities is that they may trail domestic equity returns and their diversification benefit may not be as significant in the past as correlations have increased. They can also suffer similar draw downs to domestic equities and an investor may lack familiarity with some of the holdings.
Applied Academics: The authors of recent Harvard paper, found here: Academic research find that "being globally diversified is basically making a bet that the global economy will be in a better position in 20 or 30 years than it is today and that is safer than betting on any one specific economy" In certain international markets we can screen against state controlled enterprises and also add exposure to countries based on their relative 'cheapness".