Currency risk in international portfolios: How satisfying is

An internationally diversified investor who uses a currency hedging strategy based on maximizing a mean-variance utility function should expect frequent and sizable "regret" when performance is evaluated over short time horizons. Regret occurs when a simple alternative hedging strategy out...

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Bibliographic Details
Published inJournal of portfolio management Vol. 21; no. 3; p. 59
Main Authors Gardner, Grant W, Wuilloud, Thierry
Format Journal Article
LanguageEnglish
Published London Pageant Media 01.04.1995
Subjects
Hedging
Institutional investments
Investment policy
Risk assessment
Securities analysis
Statistical analysis
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Summary:An internationally diversified investor who uses a currency hedging strategy based on maximizing a mean-variance utility function should expect frequent and sizable "regret" when performance is evaluated over short time horizons. Regret occurs when a simple alternative hedging strategy outperforms the optimal mean-variance hedging strategy. The size of the regret is estimated for institutional investors in 5 countries, and how an investor might manage regret is discussed.
ISSN:0095-4918
2168-8656