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.For investments in all markets we can reject that the variance of hedged and unhedged returns is equal, i.e. 3a#39;a#39; = 1/2, at the ... Particularly for the French, German, and U.K. stock markets minimum variance hedge ratios fall to only 30, 21, and 48anbsp;...
|Title||:||Currency Hedging for International Portfolios|
|Author||:||Jochen M. Schmittmann|
|Publisher||:||International Monetary Fund - 2010-06-01|