Optimal currency hedging for European investors in the U.S. markets

dc.contributorAalto Universityen
dc.contributorAalto-yliopistofi
dc.contributor.advisorPuttonen, Vesa
dc.contributor.authorKunnari, Matias
dc.contributor.departmentRahoituksen laitosfi
dc.contributor.schoolKauppakorkeakoulufi
dc.contributor.schoolSchool of Businessen
dc.date.accessioned2024-05-19T16:13:02Z
dc.date.available2024-05-19T16:13:02Z
dc.date.issued2024
dc.description.abstractIn this paper I use historical data from the US markets between 2003 and 2022 to show that a European investor should not have hedged away their USD currency risk in order to maximize the performance of equity-heavy portfolios measured with Sharpe ratio. The results show that as long as the equity share in their portfolio is significant and thus higher than the share of bond instruments in the portfolio, the Sharpe-maximizing hedge ratio is greatly negative. The results suggest that with bond-heavy portfolios hedging may have been beneficial in a longer term, but no statistically significant or robust conclusions can be drawn from these results. The results of not-beneficial hedging of equity portfolios is consistent with prior literature and robust to different sample periods, equity indices and measures of cost of hedging.en
dc.format.extent73
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/127867
dc.identifier.urnURN:NBN:fi:aalto-202405193475
dc.language.isoenen
dc.locationP1 Ifi
dc.programmeFinanceen
dc.subject.keywordcurrency hedgingen
dc.subject.keywordasset managementen
dc.subject.keywordportfolio optimizationen
dc.subject.keywordminimum-variance optimizationen
dc.titleOptimal currency hedging for European investors in the U.S. marketsen
dc.titleOptimaalinen valuuttasuojaus eurooppalaisille sijoittajille Yhdysvaltain markkinoillafi
dc.typeG2 Pro gradu, diplomityöfi
dc.type.ontasotMaster's thesisen
dc.type.ontasotMaisterin opinnäytefi
local.aalto.electroniconlyyes
local.aalto.openaccessno
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