Abstract

MAYA OCHOA, CECILIA; JARAMILLO OSPINA, CATALINA MARÍA  and  MONTOYA MADRIGAL, LINA MARÍA. Is it profitable to hedge exchange rate risk in a global portfolio from the perspective of a colombian investor?. estud.gerenc. [online]. 2011, vol.27, n.120, pp.83-104. ISSN 0123-5923.

This study looks for gains in terms of efficiency for local investors with an internationally diversified portfolio by hedging the exchange risk. To estimate an optimum portfolio with a minimum variance we used a robust methodology which allowed us to make statistical inference and prove that international diversification reduces portfolio risk for local investors. This methodology is applied to stock portfolios held by a Colombian and a Mexican investor, and the conclusion is that hedging exchange rate risk can reduce the risk of the portfolio, with the possible exception of a high negative correlation between the exchange rate and the local stock index.

Keywords : International diversification; minimum global variance portfolio; variable income; volatility; exchange rate risk hedging.

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