To hedge or not to hedge: the performance of simple strategies for hedging foreign exchange risk

@article{Morey2001ToHO,
  title={To hedge or not to hedge: the performance of simple strategies for hedging foreign exchange risk},
  author={Matthew R. Morey and M. Simpson},
  journal={Journal of Multinational Financial Management},
  year={2001},
  volume={11},
  pages={213-223}
}
  • Matthew R. Morey, M. Simpson
  • Published 2001
  • Economics
  • Journal of Multinational Financial Management
  • Abstract This paper investigates the efficacy of simple strategies for hedging foreign exchange risk. The strategies are: to always hedge, to never hedge, to hedge when the forward rate is at a premium, to hedge only when the premium is large, and a strategy based upon relative purchasing power parity. We find a strategy which hedges based upon large premia generally outperforms the other strategies for the period 1989–1998. Moreover, we document that in every sample and time horizon period, an… CONTINUE READING
    44 Citations

    Figures and Tables from this paper.

    References

    SHOWING 1-9 OF 9 REFERENCES
    International equity investment with selective hedging strategies
    • 30
    Exchange rate models of the seventies. Do they fit out of sample
    • 3,480
    The long memory of the forward premium
    • 216
    • Highly Influential
    • PDF
    Purchasing Power Parity: Evidence from a New Test
    • 15
    • PDF
    Is purchasing power parity a useful guide to the dollar
    • 46
    The Purchasing Power Parity Puzzle
    • 1,916
    • PDF
    The Free Lunch in Currency Hedging: Implications for Investment Policy and Peformance Standards
    • 226
    An Analysis of a Selective Currency Hedging Strategy
    • Ph.D. Dissertation,
    • 1993
    Currency hedging strategies for internationally diversified equity portfolios
    • 38