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A Test of Hedging Alternatives for the US Currency and the US Stock Market

23 Pages Posted: 3 Nov 2011 Last revised: 5 Nov 2013

Ron Christner

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

Mehmet F. Dicle

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

John Levendis

Loyola University New Orleans

Date Written: October 28, 2013

Abstract

This paper examines the degree of correlation, and possible causation, between the US Dollar (against the Euro and the British Pound) and the US equity market indexes (the S&P 500 and the NASDAQ composite). The information utilized in this study is the 14 year period beginning in January 1999 and ending in December 2012. The purpose of this exercise is to judge the potential effectiveness of hedging against declines in the (major) US stock market indexes utilizing the dollar, or the reverse, focusing particularly on the financial crisis period encompassing the latter part of 2007 through early 2009. A currency hedge that is long on the Euro or Pound seems to provide protection against severe US stock market declines.

Keywords: US Dollar, Euro, British Pound, volatility, hedging, S&P500, NASDAQ, equity markets, currency markets

JEL Classification: F31, G15

Suggested Citation

Christner, Ron and Dicle, Mehmet F. and Levendis, John, A Test of Hedging Alternatives for the US Currency and the US Stock Market (October 28, 2013). Available at SSRN: https://ssrn.com/abstract=1953571 or http://dx.doi.org/10.2139/ssrn.1953571

Ron Christner

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
New Orleans, LA 70118
United States

Mehmet F. Dicle (Contact Author)

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
New Orleans, LA 70118
United States

HOME PAGE: http://researchforprofit.com

John Levendis

Loyola University New Orleans ( email )

6363 St. Charles Ave., box 15
New Orleans, LA 70118
United States

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