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Is currency hedging necessary for emerging-market equity investment?

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  • Kim, Daehwan

Abstract

When a developed-market investor buys emerging-market stocks, this investor may be justified not to hedge currency risk. Our analysis indicates that completely unhedged portfolios often perform better than fully hedged portfolios and are not significantly inferior to optimally hedged portfolios. We provide a carry-profit-based explanation of this finding.

Suggested Citation

  • Kim, Daehwan, 2012. "Is currency hedging necessary for emerging-market equity investment?," Economics Letters, Elsevier, vol. 116(1), pages 67-71.
    • Handle: RePEc:eee:ecolet:v:116:y:2012:i:1:p:67-71
    DOI: 10.1016/j.econlet.2012.01.008
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    References listed on IDEAS

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    Cited by:

    1. Fabio Filipozzi & Kersti Harkmann, 2014. "Currency hedge – walking on the edge?," Bank of Estonia Working Papers wp2014-5, Bank of Estonia, revised 10 Oct 2014.

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    More about this item

    Keywords

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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