TY - JOUR
T1 - Forward exchange bias, hedging and the gains from international diversification of investment portfolios
AU - Levy, Haim
AU - Lim, Kok Chew
N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].
PY - 1994/4
Y1 - 1994/4
N2 - The gains to the US investor from international diversification of investment portfolios are examined for portfolio strategies that hedge and strategies that do not hedge exchange rate risk via the interbank forward market. Using the Sharpe Performance Index and stochastic dominance as performance measures, almost all the unhedged strategies outperformed the hedged strategies for 1985-1988; the opposite held for 1981-1984. The results are explained by the biasedness of forward rates in predicting future spot rates. (JEL F30). © 1994.
AB - The gains to the US investor from international diversification of investment portfolios are examined for portfolio strategies that hedge and strategies that do not hedge exchange rate risk via the interbank forward market. Using the Sharpe Performance Index and stochastic dominance as performance measures, almost all the unhedged strategies outperformed the hedged strategies for 1985-1988; the opposite held for 1981-1984. The results are explained by the biasedness of forward rates in predicting future spot rates. (JEL F30). © 1994.
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U2 - 10.1016/0261-5606(94)90013-2
DO - 10.1016/0261-5606(94)90013-2
M3 - RGC 21 - Publication in refereed journal
SN - 0261-5606
VL - 13
SP - 159
EP - 170
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
IS - 2
ER -