Currency Hedging in Emerging Markets
Master thesis
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http://hdl.handle.net/11250/2621898Utgivelsesdato
2019Metadata
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- Master of Science [1525]
Sammendrag
We study the effectiveness of currency hedging in emerging markets, focusing on
portfolio performance employing both a minimum variance and a unitary hedging
strategy. The perception is that the currency in emerging markets experience
higher volatility than developed countries. We find that the minimum variance
hedge significantly reduces the portfolio standard deviation for all countries,
while the unitary hedge statistically increases portfolio standard deviation. We
also find that periods of financial distress may cause large outliers for some
countries. Implementing a conditional approach of the minimum variance hedge
manage to reduce the vulnerability to large interest rates and currency
fluctuations. We conclude that both applications of the minimum variance
strategies are beneficial for investors in the emerging markets we investigate.
Beskrivelse
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2019