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Internationally Diversified Bond Portfolios: The Merits of Active Currency Risk Management / Richard M. Levich, Lee R. Thomas.
- Format:
- Book
- Author/Creator:
- Levich, Richard M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w4340.
- NBER working paper series no. w4340
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Internationally Diversified Bond Portfolios
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1993.
- Summary:
- A new statistical procedure is used to test for weak form efficiency in the foreign exchange futures markets. Using daily currency futures prices for the 1976-1990 period, we conclude that successive exchange rate changes have not been independent We examine the implications of this finding for two groups of investors: (1) return seeking investors considering foreign exchange as a separate asset class; (2) international portfolio investors deciding whether or not to currency hedge the foreign exchange rate exposures embedded in their non-dollar investments. Using the currency futures data and monthly data on 10-year dollar and non-dollar bonds, we conclude that active currency risk management, based on a simple application of technical trading signals, can substantially improve the risk-return opportunities for both groups of investors in comparison to passive currency strategies.
- Notes:
- Print version record
- April 1993.
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