Foreign currency for long‐term investors
Bibliographic Data
| ID | 9712146 |
|---|---|
| Authors | John Y Campbell (Harvard University), Luis M Viceira (Harvard University), Joshua S White (Harvard University) |
| Year | 2003 |
| Volume | 113 |
| Issue | 486 |
| Pages | C1-C25 |
| Publication date | 2003-03-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/1468-0297.00120 |
| OpenAlex | W3121204372 |
| Language | EN |
| Citations received | 3 |
| References cited | 31 |
Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and hold only domestic Treasury bills. This paper argues that the conventional wisdom may be wrong for long‐term investors. Domestic bills are risky for long‐term investors, because real interest rates vary over time and bills must be rolled over at uncertain future interest rates. This risk can be hedged by holding foreign currency if the domestic currency tends to depreciate when the domestic real interest rate falls. Empirically this effect is important
Business · Currency · Economics · Foreign exchange risk · Foreign exchange swap · Hedge · Interest rate · International economics · Monetary economics · Term (time · Treasury · Financial Markets and Investment Strategies · Global Financial Crisis and Policies · Monetary Policy and Economic Impact
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Anomalies
| Unique citing works | 3 |
|---|---|
| Citations per year | 0,13 |
| Citation span | 2002 - 2008 (7) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 3 |