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| Tekijä: | VanderLinden, D. Jiang, C.X. Hu, M. |
| Otsikko: | Conditional hedging and portfolio performance |
| Lehti: | Financial Analysts' Journal
2002 : JUL/AUG, VOL. 58:4, p. 72-82 |
| Asiasana: | Stock markets Hedging Portfolio investment Performance appraisal Foreign exchange Statistical methods USA |
| Kieli: | eng |
| Tiivistelmä: | Simple conditional currency-hedging rules often increase risk-adjusted portfolio returns and are thus of interest to investors. Several researchers have reported successful application of a "forward hedge rule" (FHR) in which one hedges whenever the foreign currency trades at a forward premium. An alternative strategy, a "real-interest-rate hedge rule" (RIR), is based on hedging when the domestic real interest rate exceeds the foreign rate. As an extension, this study proposes a combination of these rules, that is, a "real forward hedge rule" (RFHR). This study evaluates the performance of the rules for various currency, stock, and bond portfolios from the developed countries. In tests of risk-adjusted returns for 1976-1997, the RFHR significantly outperformed standard benchmarks and often beat the FHR and the RIR. Moreover, there are also results reported of a simple dominance test. |
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