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Global Currency Hedging
Author(s) -
CAMPBELL JOHN Y.,
SERFATYDE MEDEIROS KARINE,
VICEIRA LUIS M.
Publication year - 2010
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2009.01524.x
Subject(s) - currency , liberian dollar , hedge , foreign exchange risk , monetary economics , equity (law) , us dollar , hedge fund , economics , bond , position (finance) , financial economics , business , financial system , finance , ecology , political science , law , biology
Over the period 1975 to 2005, the U.S. dollar (particularly in relation to the Canadian dollar), the euro, and the Swiss franc (particularly in the second half of the period) moved against world equity markets. Thus, these currencies should be attractive to risk‐minimizing global equity investors despite their low average returns. The risk‐minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the U.S. dollar. There is little evidence that risk‐minimizing investors should adjust their currency positions in response to movements in interest differentials.