Exchange rate uncertainty, forward contracts, and international portfolio selection

Article Abstract:

In this paper, ex ante efficient portfolio selection strategies are developed to realize potential gains from international diversification under flexible exchange rates. It is shown that exchange rate uncertainty is a largely nondiversifiable factor adversely affecting the performance of international portfolios. Therefore, it is essential to effectively control exchange rate volatility. For that purpose, two methods of exchange risk reduction are simultaneously employed: multicurrency diversification and hedging via forward exchange contracts. The empirical findings show that international portfolio selection strategies designed to control both estimation and exchange risks almost consistently outperform the U.S. domestic portfolio in out-of-sample periods. (Reprinted by permission of the publisher.)

Methods, Analysis, Risk management, Foreign exchange, Foreign exchange rates, Financial research

---

International arbitrage pricing theory: an empirical investigation

Article Abstract:

An international setting is used to test the arbitrage pricing theory (APT); the tests employ inter-battery factor analysis for the identification of common factors across national boundaries and the Chow test to assess the APT's validity. The testing procedures are detailed; their results indicate that common factors existing between any two countries involved in trade may number from one to five (which is fewer than the number of factors affecting domestic capital markets), but the validity of the APT across international boundaries is rejected. The cross-sectional and cross-national testing of the APT does assess the validity of the pricing model's application in local or regional sections of the capital markets.

Economic aspects, International aspects, Securities, Capital market, Capital markets, Arbitrage

---

Estimating the correlation structure of international share prices

Article Abstract:

Twelve alternative forecasting models for estimating the correlation structure of international share prices are presented and empirically tested relative to full historical extrapolation. The mean squared error and stochastic dominance based on the frequency distribution of the squared forecast errors are the major evaluation criteria. In terms of forecasting accuracy, the National Mean Model strictly dominates all the other models.

Comparative analysis, Stock price forecasting

Similar abstracts:

• Abstracts: Relative absorptive capacity and interorganizational learning. The trusted general manager and business unit performance: empirical evidence of a competitive advantage
• Abstracts: Exploiting international stock market correlations with open-end international mutual funds. A note on fair value pricing of mutual funds
• Abstracts: A note on execution costs for stock index futures: information versus liquidity effects. The use of undisclosed limit orders on the Australian Stock Exchange
• Abstracts: Tests of analysts' overreaction/underreaction to earnings information as an explanation for anomalous stock price behavior
• Abstracts: Corporate control, portfolio choice, and the decline of banking. Do depositors punish banks for bad behavior? Market discipline, deposit insurance, and banking crises

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.