On the rewards to international investing: a safe haven currency perspective
Journal article: The safe haven property of the Swiss franc presents a specific challenge for internationally minded Swiss-based investors. The central issue is whether the traditional under-performance of Swiss assets is made up by the secular appreciation of the Swiss franc combined with the propensity of the safe haven to strengthen in times of market stress. In this paper, we review the evidence on the terms of this challenge. We conclude that a Swiss bias in asset allocation can lead to considerable return shortfalls over the long run and that systematic currency hedging would not have been historically justified and is unlikely to be in the future. Assuming a fair amount of currency risk thus appears inevitable for long-run Swiss-based investors.
Author(s)
Jean-Pierre Danthine, Samuel Danthine
Journal
- Swiss Journal of Economics and Statistics
Date of publication
- 2018
Keywords JEL
Keywords
- Uncovered interest parity
- Safe haven currency
- Currency hedging
URL of the HAL notice
Version
- 1
Volume
- 154