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International Equity Portfolios and Currency Hedging: The Viewpoint of German and Hungarian Investors

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Author Info
Bugàr, Gyöngyi () (Janus Pannonius University of Pécs, Faculty of Business and Economics)
Maurer, Raimond () (Lehrstuhl fuer Investment, Portfolio Management und Alterssicherung)

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Abstract

In this paper we study the benefits derived from international diversification of stock portfolios from German and Hungarian point of view. In contrast to the German capital market, which is one of the largest in the world, the Hungarian Stock Exchange is an emerging market. The Hungarian stock market is highly volatile, high returns are often accompanied by extremely large risk. Therefore, there is a good potential for Hungarian investors to realize substantial benefits in terms of risk reduction by creating multi-currency portfolios. The paper gives evidence on the above mentioned benefits for both countries by examining the performance of several ex ante portfolio strategies. In order to control the currency risk, different types of hedging approaches are implemented

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Publisher Info
Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 01-10.

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Length: 27 pages
Date of creation: 27 Feb 2001
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Handle: RePEc:xrs:sfbmaa:01-10

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Maurer, Raimond & Bugàr, Gyöngyi, 1999. "Efficient Risk Reducing Strategies by International Diversification: Evidence from a Central European Emerging Market," Sonderforschungsbereich 504 Publications 99-88, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  2. Jorion, Philippe, 1985. "International Portfolio Diversification with Estimation Risk," Journal of Business, University of Chicago Press, vol. 58(3), pages 259-78, July. [Downloadable!] (restricted)
  3. Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September. [Downloadable!] (restricted)
  4. Levy, Haim & Kroll, Yoram, 1978. "Ordering Uncertain Options with Borrowing and Lending," Journal of Finance, American Finance Association, vol. 33(2), pages 553-74, May. [Downloadable!] (restricted)
  5. Sarin, Rakesh K. & Weber, Martin, 1993. "Risk-value models," European Journal of Operational Research, Elsevier, vol. 70(2), pages 135-149, October. [Downloadable!] (restricted)
  6. Geert Bekaert & Michael S. Urias, 1996. "Diversification, Integration and Emerging Market Closed-End Funds," NBER Working Papers 4990, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Peter A. Abken & Milind M. Shirkhande, 1997. "The role of currency derivatives in internationally diversified portfolios," Economic Review, Federal Reserve Bank of Atlanta, issue Q 3, pages 34-59. [Downloadable!]
  8. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August. [Downloadable!] (restricted)
  9. William C. Hunter & Stephen G. Timme, 1992. "A Stochastic Dominance Approach to Evaluating Foreign Exchange Hedging Strategies," Financial Management, Financial Management Association, vol. 21(3), Fall.
  10. Haavisto, Tarmo & Hansson, Bjorn, 1992. " Risk Reduction by Diversification in the Nordic Stock Markets," Scandinavian Journal of Economics, Blackwell Publishing, vol. 94(4), pages 581-88.
  11. Froot, Kenneth A & Frankel, Jeffrey A, 1989. "Forward Discount Bias: Is It an Exchange Risk Premium?," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 139-61, February. [Downloadable!] (restricted)
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  12. William F. Sharpe, 1965. "Mutual Fund Performance," Journal of Business, University of Chicago Press, vol. 39, pages 119. [Downloadable!]
  13. Glen, Jack & Jorion, Philippe, 1993. " Currency Hedging for International Portfolios," Journal of Finance, American Finance Association, vol. 48(5), pages 1865-86, December. [Downloadable!] (restricted)
  14. Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, vol. 60(4), pages 668-75, September. [Downloadable!] (restricted)
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  1. Raimond Maurer & Frank Reiner & Steffen Sebastian, 2004. "Characteristics of German Real Estate Return Distributions: Evidence from Germany and Comparison to the U.S. and U.K," Working Paper Series: Finance and Accounting 108, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
  2. Raimond Maurer & Shohreh Valiani, 2007. "Hedging the Exchange Rate Risk in International Portfolio Diversification: Currency Forwards versus Currency Options," Working Paper Series: Finance and Accounting 109, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
  3. Luis Berggrun, 2005. "Currency Hedging for a Dutch Investor: The Case of Pension Funds and Insurers," DNB Working Papers 054, Netherlands Central Bank, Research Department. [Downloadable!]
  4. Raimond Maurer & Frank Reiner, 2001. "International Asset Allocation with Real Estate Securities in a Shortfall-Risk Frame-work: The Viewpoint of German and US Investors," Working Paper Series: Finance and Accounting 82, Department of Finance, Goethe University Frankfurt am Main. [Downloadable!]
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