TY  - JOUR
AU  - Levich,Richard M.
AU  - Thomas,Lee R.
TI  - Internationally Diversified Bond Portfolios: The Merits of Active Currency Risk Management
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4340
PY  - 1994
Y2  - April 1994
UR  - http://www.nber.org/papers/w4340
L1  - http://www.nber.org/papers/w4340.pdf
N1  - Author contact info:
Richard M. Levich
Stern School of Business
New York University
44 West 4th Street
New York, NY 10012
Tel: 212/998-0422
Fax: 212/995-4256
E-Mail: RLEVICH@STERN.NYU.EDU
M2  - featured in NBER digest on 1993-12-01
AB  - A new statistical procedure is used to test for weak form efficiency in the foreign exchange futures markets. Using daily currency futures prices for the 1976-1990 period, we conclude that successive exchange rate changes have not been independent We examine the implications of this finding for two groups of investors: (1) return seeking investors considering foreign exchange as a separate asset class; (2) international portfolio investors deciding whether or not to currency hedge the foreign exchange rate exposures embedded in their non-dollar investments. Using the currency futures data and monthly data on 10-year dollar and non-dollar bonds, we conclude that active currency risk management, based on a simple application of technical trading signals, can substantially improve the risk-return opportunities for both groups of investors in comparison to passive currency strategies.
ER  -