Faculty of Economics and Business Administration Publications Database

International Equity Portfolios and Currency Hedging: The Viewpoint of German and Hungarian Investors

Authors:
Bugár, Gyöngyi
Source:
Volume: 32
Number: 1
Pages: 171 - 197
Month: May
ISSN-Print: 0515-0361
Link External Source: Online Version
Year: 2002
Keywords: International Portfolio Diversification; Estimation Risk; Hedging the Currency Risk; Emerging Stock Markets
Abstract: In this paper we study the benefits derived from international diversification of equity portfolios from the German and the Hungarian points of view. In contrast to the German capital market, which is one of the largest in the world, the Hungarian Stock Exchange is an emerging market. The Hungarian stock market is highly volatile, high returns are often accompanied by extremely large risk. Therefore, there is a good potential for Hungarian investors to realise substantial benefits in terms of risk reduction by creating multi-currency portfolios. The paper gives evidence on the above mentioned benefits for both countries by examining the performance of several ex ante portfolio strategies. In order to control the currency risk, different types of hedging approaches are implemented.
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