Global Currency Hedging

116 Pages Posted: 27 Jun 2007 Last revised: 7 Aug 2007

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: May 2007

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.

Suggested Citation

Campbell, John Y. and Serfaty-de Medeiros, Karine and Viceira, Luis M., Global Currency Hedging (May 2007). NBER Working Paper No. w13088. Available at SSRN: https://ssrn.com/abstract=986938

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)

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Cambridge, MA 02138
United States

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