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

20 Pages Posted: 25 Apr 2017

See all articles by Samuel Danthine

Samuel Danthine

École Nationale de la Statistique et de l'Analyse de l'Information (ENSAI)

Jean-Pierre Danthine

Paris School of Economics (PSE)

Date Written: April 2017

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.

Keywords: Uncovered Interest Parity; Safe haven currency; currency hedging

JEL Classification: F30, F31, G11

Suggested Citation

Danthine, Samuel and Danthine, Jean-Pierre, On the Rewards to International Investing: A Safe Haven Currency Perspective (April 2017). CEPR Discussion Paper No. DP11984, Available at SSRN: https://ssrn.com/abstract=2957523

Samuel Danthine

École Nationale de la Statistique et de l'Analyse de l'Information (ENSAI) ( email )

Rennes Métropole - Campus de Ker Lann
Rue Blaise Pascal
BP 37203- 35172 BRUZ Cedex
France

Jean-Pierre Danthine (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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