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Assessment of Currency Hedging Strategies for International Equity Portfolios: Evidence from a perspective of a UK investor investing in the US

Parikh, Jinay Dharmesh (2019) Assessment of Currency Hedging Strategies for International Equity Portfolios: Evidence from a perspective of a UK investor investing in the US. Masters thesis, Dublin, National College of Ireland.

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Abstract

Even after several research studies being carried out to access the performance of the hedging strategies, there is no universally accepted strategy that claims to improve the performance of the portfolio. Therefore, this research investigates the effectiveness of the hedging strategies from a perspective of a UK investor investing in the US markets considering a time interval from 1998-2018. The study examines the hedging strategies of No Hedge, Forwards, Options and Zero Cost Cylinder by using the risk adjusted return measure of Sharpe ratio.

The empirical results indicate that the No Hedge portfolio achieved higher Sharpe ratio for both the time interval of 1998-2018 and 2003-2018. The study also provides results for the period of financial crisis whereby the No Hedge portfolio showed improved performance suggesting that the risk reducing capacity of the hedging strategies are diminished during the period of crisis. An inverse relationship has been identified between the home currency depreciation and the performance of the No Hedge portfolio. Furthermore, the test of hypothesis indicates that there is no statistical difference between the performance of the hedging strategies. Along these lines, the findings of this study suggest that it is not beneficial for a UK investor to hedge the portfolio when investing in the US markets.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance > Money > Currency
H Social Sciences > HG Finance > Investment
H Social Sciences > HG Finance > Investment > Private equity
Divisions: School of Business > Master of Science in Finance
Depositing User: CAOIMHE NI MHAICIN
Date Deposited: 21 Oct 2019 12:59
Last Modified: 21 Oct 2019 12:59
URI: http://norma.ncirl.ie/id/eprint/3983

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