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Optimal Multi-Currency Investment Strategies with Exact Attribution in Three Asian Countries

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  • CORNELIS A. LOS

    (Kent State University)

Abstract

Singer and Karnosky's (1995) exact and complete return attribution framework does not account for risk, since it ignores accumulated historical information. Its implied investment strategy selection is based on simple return maximization and ignores that investment strategies are correlated via intra-and inter-market risks. Using simple tensor algebra we extend their exact accounting framework to include market risk measurements for n countries. The resulting n^2 x n^2 strategy risk matrix exactly decomposes into a tensor sum of the n x n fundamental market risk matrices. Since the strategy risk matrix is singular with rank = 2n-1

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File URL: http://128.118.178.162/eps/fin/papers/0409/0409047.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0409047.

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Date of creation: 18 Sep 2004
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Handle: RePEc:wpa:wuwpfi:0409047

Note: Type of Document - pdf. Los, Cornelis A., 'Optimal Multi- Currency Investment Strategies with Exact Attribution in Three Asian Countries' (January 1998). Centre for Research in Financial Services WP #98-01.
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  1. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  2. Eun, Cheol S & Resnick, Bruce G, 1988. " Exchange Rate Uncertainty, Forward Contracts, and International Portfolio Selection," Journal of Finance, American Finance Association, vol. 43(1), pages 197-215, March.
  3. Chapman, D.A., 1996. "Approximating the Asset Pricing Kernel," Papers 96-02, Rochester, Business - Financial Research and Policy Studies.
  4. Glen, Jack & Jorion, Philippe, 1993. " Currency Hedging for International Portfolios," Journal of Finance, American Finance Association, vol. 48(5), pages 1865-86, December.
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Cited by:
  1. Cornelis A. Los, 2004. "Measuring Financial Cash Flow and Term Structure Dynamics," Finance 0409046, EconWPA.
  2. Cornelis A. Los, 2004. "Nonparametric Efficiency Testing of Asian Stock Markets Using Weekly Data," Finance 0409033, EconWPA.
  3. Cornelis A. Los, 2004. "Optimal Asian Multi-Currency Strategy Portfolios with Exact Risk Attribution," Finance 0409038, EconWPA.
  4. Cornelis A. Los, 2004. "Model Uncertainty, Complexity and Rank in Finance," Econometrics 0411013, EconWPA.

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