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Post by Sapphire Capital on Apr 7, 2009 20:44:50 GMT 4
Global Currency Hedging John Y. Campbell Harvard University - Department of Economics; National Bureau of Economic Research (NBER) Karine Serfaty-de Medeiros OC&C Strategy Consultants Luis M. Viceira Harvard Business School - Finance Unit; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER) January 29, 2009 Harvard Business School Finance Working Paper No. 09-089 Abstract: Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have 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 US dollar. There is little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest differentials. papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1334735_code698198.pdf?abstractid=1334735&mirid=1
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