Global Currency Hedging

115 Pages Posted: 20 Mar 2007 Last revised: 30 Mar 2014

See all articles by John Y. Campbell

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Karine Serfaty-de Medeiros

OC&C Strategy Consultants

Luis M. Viceira

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: January 28, 2009

Abstract

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.

Keywords: Foreign exchange, Siegel's paradox, risk management

JEL Classification: F31, G11

Suggested Citation

Campbell, John Y. and Serfaty-de Medeiros, Karine and Viceira, Luis M., Global Currency Hedging (January 28, 2009). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=970847 or http://dx.doi.org/10.2139/ssrn.970847

John Y. Campbell (Contact Author)

Harvard University - Department of Economics ( email )

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HOME PAGE: http://scholar.harvard.edu/campbell

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Karine Serfaty-de Medeiros

OC&C Strategy Consultants ( email )

United States

Luis M. Viceira

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6331 (Phone)
617-496-6592 (Fax)

HOME PAGE: http://www.people.hbs.edu/lviceira

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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