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Global Currency Hedging

  • John Y. Campbell
  • Karine Serfaty-de Medeiros
  • Luis M. Viceira

Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the US dollar. There is little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest differentials.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13088.

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Date of creation: May 2007
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Publication status: published as John Y. Campbell & Karine Serfaty-De Medeiros & Luis M. Viceira, 2010. "Global Currency Hedging," Journal of Finance, American Finance Association, vol. 65(1), pages 87-121, 02.
Handle: RePEc:nbr:nberwo:13088
Note: AP IFM
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