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On the Rewards to International Investing: A Safe Haven Currency Perspective

Author

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  • Danthine, Jean-Pierre
  • Danthine, Samuel

Abstract

The safe haven property of the Swiss franc presents a specific challenge for Swiss-based investors in their international investments. The central issue is whether the traditional under-performance of Swiss assets is compensated by the currency risk associated with the safe haven and the secular appreciation tendency of the franc. In this paper we review the evidence on the terms of this challenge. We conclude that long-run Swiss-based investors are well compensated for the currency risks they take on, that a Swiss-bias in asset allocation can lead to considerable return shortfalls over the long run, and that systematic currency hedging would not have been historically justified and is unlikely to be in the future.

Suggested Citation

  • Danthine, Jean-Pierre & Danthine, Samuel, 2017. "On the Rewards to International Investing: A Safe Haven Currency Perspective," CEPR Discussion Papers 11984, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11984
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    References listed on IDEAS

    as
    1. Peter Kugler & Beatrice Weder, 2004. "International Portfolio Holdings and Swiss Franc Asset Returns," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 301-325, September.
    2. Peter Kugler & Beatrice Weder, 2004. "International Portfolio Holdings and Swiss Franc Asset Returns," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 301-325, September.
    3. Angelo Ranaldo & Paul Söderlind, 2010. "Safe Haven Currencies," Review of Finance, European Finance Association, vol. 14(3), pages 385-407.
    4. Ernst Baltensperger & Peter Kugler, 2016. "The historical origins of the safe haven status of the Swiss franc:," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(02), pages 1-30, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Uncovered Interest Parity; Safe haven currency; currency hedging;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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