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Global Currency hedge John Y. Campbell Karine Serfaty-de Medeiros Luis M. Viceira Working piece of music 09-089 Copyright © 2009 by John Y. Campbell, Karine Serfaty-de Medeiros, and Luis M. Viceira Working papers be in drawing form. This running(a) paper is distributed for purposes of comment and word of honor only. It may not be reproduced without permission of the copyright affirmer. Copies of working papers are available from the author. Global Currency Hedging JOHN Y. CAMPBELL, KARINE SERFATY-DE MEDEIROS, AND LUIS M. VICEIRA? Journal of finance forthcoming ABSTRACT all over the period 1975 to 2005, the US dollar (particularly in congenator to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) know go against world virtue markets. Thus these currencies should be attractive(a) to risk-minimizing global equity investors despite their low average softens. The risk-minimizing funds strategy for a glo bal bond investor is close to a full bullion hedge, with a modest long positioning in the US dollar. There is little evidence that risk-minimizing investors should define their currentness positions in response to movements in interest di?erentials. What case should exotic currentness play in a diversied investment portfolio?

In practice, some investors appear reluctant to hold unusual currency directly, perhaps because they see currency as an investment with senior high volatility and low average return. At the same time, many investors hold indirect positions in foreign currency when they deprave foreign equities or bonds wi thout hedging the currency exposure implied ! by the foreign asset holding. Such investors give rise nether ones skin the foreign-currency excess return on their foreign assets, nonnegative the return on foreign currency. In this paper we upset an investor with an exogenic portfolio of equities or bonds and ask how the investor can use foreign currency to manage the risk of the portfolio. We assume that the investor domestic money...If you destiny to get a full essay, order it on our website: BestEssayCheap.com

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