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Currency Swaps and International Real Estate Investment
Author(s) -
Ziobrowski Alan J.,
Ziobrowski Brigitte J.,
Rosenberg Sidney
Publication year - 1997
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00713
Subject(s) - real estate , currency , diversification (marketing strategy) , foreign exchange risk , portfolio , economics , foreign exchange swap , capitalization rate , real estate investment trust , monetary economics , financial economics , devaluation , business , finance , marketing
This paper examines the efficacy of currency swaps as a hedging mechanism for the exchange rate risk associated with foreign investment in real estate. Earlier studies have concentrated on short‐term hedging instruments such as options and forward contracts. Currency swaps are better suited for use on investments with long‐term holding periods such as real estate. The findings indicate that, although hedging United States real estate investments with currency swaps suppresses most of the risk induced by currency instability, the improvements are insufficient to produce diversification gains for foreign investors in the context of mean‐variance portfolio performance.