Currency Hedging for International Portfolios

June 1, 2010

Preview Citation

Format: Chicago

Jochen M. Schmittmann Currency Hedging for International Portfolios, (USA: International Monetary Fund, 2010) accessed November 23, 2024

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.

Subject: Currencies, Exchange rates, Hedging, Stock markets, Stocks

Keywords: Exchange rate, Global bond, Hedge ratio, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/151
Stock No:

WPIEA2010151
ISBN:

9781455201341
ISSN:

1018-5941

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