Currency Hedging for International Portfolios

 
Author/Editor: Schmittmann, Jochen M.
 
Publication Date: June 01, 2010
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper examines the benefits from hedging the currency exposure of international investments in single- and multi-country equity and bond portfolios from the perspectives of German, Japanese, British and American investors. Over the period 1975 to 2009, hedging of currency risk substantially reduced the volatility of foreign investments at a quarterly investment horizon. Contrary to previous studies, the paper finds that at longer investment horizons of up to five years the case for hedging for risk reduction purposes remained strong.In addition to its impact on risk, hedging affected returns in economically meaningful magnitudes in some cases.
 
Series: Working Paper No. 10/151
Subject(s): Exchange risk | Foreign exchange transactions | Foreign investment | International capital markets | Risk management | Multiple currency practices | Germany | Japan | United Kingdom | United States

Author's Keyword(s): Currency hedging | international investments | currency risk
 
English
Publication Date: June 01, 2010
Format: Paper
Stock No: WPIEA2010151 Pages: 44
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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