Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/45213
Title: Optimal hedging of stock portfolios against foreign exchange risk: theory and applications
Authors: Bailey, W.
Ng, E. 
Stulz, R.M.
Issue Date: 1992
Source: Bailey, W.,Ng, E.,Stulz, R.M. (1992). Optimal hedging of stock portfolios against foreign exchange risk: theory and applications. Global Finance Journal 3 (2) : 97-113. ScholarBank@NUS Repository.
Abstract: This paper applies a formula for the optimal hedge in a mean-variance framework to an investment in the Nikkei 225. It is shown that through hedging U.S. investors can construct a portfolio long in the Nikkei whose dollar excess return has the same volatility as the yen excess return of the Nikkei. There seems to be little gain from improving estimates of the exposure of the Nikkei to the dollar-yen exchange rate; in contrast, the performance of portfolios can be enhanced substantially by obtaining better forecasts of exchange rate changes. © 1992.
Source Title: Global Finance Journal
URI: http://scholarbank.nus.edu.sg/handle/10635/45213
ISSN: 10440283
Appears in Collections:Staff Publications

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