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The unsung impact of currency risk on the performance of international real property investment

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  • Addae-Dapaah, Kwame
  • Tan Yong Hwee, Wilfred
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    Abstract

    The paper revisits the currency risk debate to ascertain the statistical significance of currency risk on the return of international real property investment, especially in a period of increased exchange rate volatility. After statistical analyses of the returns of a portfolio of office investments in seven Asia Pacific cities over the 1986 to 2007 period, it was found that currency risk had a statistically significant positive impact on the performance of the portfolio of office investments. This is confirmed by the results of stochastic dominance test. If the results of this study are verified by subsequent studies, and the past reliably presages the future, they would imply that investors holding portfolios of real property investments in the sample markets might not need to be unduly concerned with currency risk.

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    Bibliographic Info

    Article provided by Elsevier in its journal Review of Financial Economics.

    Volume (Year): 18 (2009)
    Issue (Month): 1 (January)
    Pages: 56-65

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    Handle: RePEc:eee:revfin:v:18:y:2009:i:1:p:56-65

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    Web page: http://www.elsevier.com/locate/inca/620170

    Related research

    Keywords: Currency risk Asia Pacific Portfolio Investment Return Real property;

    References

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    17. Kenneth A. Froot, 1993. "Currency Hedging over Long Horizons," NBER Working Papers 4355, National Bureau of Economic Research, Inc.
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