StrategicCurrencyHedgingEoshoml加eager0Qnjpfermetiong加)Qirersjjedpor会0加Q1Gge加eCHrTenlCJ7训ps0sSociaedpRoiingSfochs疗071ijerenfconpiries?StrategicCurrencyHedging。SeanO“Connor一珑hissccondanalyticalrolaton训thcmanagementtriningprogramatZcnexSceuriics一HehadbcenassignedtotheintermationalequiicsdivisionandhadbccnsiventhctaskofIeviewingbeth许ctheoryandevidcncereaicdtoactivecurrencymanagementofcdpn“Argumeatssupportingactivecurrencymanagement一FstunikecquibymarketsHkctheNewYonkStockExchange,manyofthcparticipantwholnadcdaily议tglobalcurrencymaketsarcncttrading垂raproft一Corporatshedecrsaretradingforhedgingpurposesicentralbanlkstrad讨Pursuitofaanctbyofimaciocconomicgoal一Dniitemanyotherfnancialmarkctsthatmectimedcmnancialc绍ciencycriierathere芸nerealconscnstsof乙cpropervaiationmadell9fprcurrencies一ThismensthatthcresamuchhiherpossibiitythateurenoyvalucscoulddcviateforIngpenodsoftmcfomtheircorcetvaluc一Anuniberofrecentstudicshadindicatedthatactivecurrencymanagersdoiadccdad4valuctothciportiaioperformance一Oncreeentstudyfolowing19activecumeneymanagersaverasevenyearperioddicatedactivccumeneynanagersbavehadonavefageposiiveperformanee讨fourofthcsevenyearsExhibit1Russel/MellonSurveyof19ActiveManagers,EndingJune30,2003AnnualedctiveRetominPercentperAnnumPercentieear2s。3s4e67Weez53381644094o95H25Medan词571a454554655E-oo7c036-oonEoa036Maan03588654655157JoveeunilonniyiciieoestCoseedtyieircopretezmopenonpetesIat门sseedEExhibit2AnnualHistoricalExcessReturns,AnnualRisk,andSharpeRatiosforSelectedEquitiesandCurrencies,January1978toFebruary2003EcCoontAengeecesietmyAnnaaltet00Sovetaeopte70砂aoComd53msEAponEEaux环neoa山38EERonedconeng。Auosoaes3ao5ConsoE4EJpusoEEao5covusognEUniestedt3HaInerstonaComads4EaquteAn56naoaauxE1spau在neoaMeigedstolsawaInenstonlComdawonautennanEaxs6eoxe山agnoxoStrategicHedging:CaseQuestions1AccordingtoExhibit1werethereasignificantnumberofportfoliomanagersabletoaddvaluetointernationalPportfoliosthroughactive(selective)currencymanagementconsistentlyoverthetimeperiodstudied?2.AccordingtoExhibit2,wouldtheinternationalinvestorinanAustraliaportfoliobebettero作onaverage,withacompletelyhedgedorunhedgedportfolio?3歪youwereSean,whatwouldyouconcludefromthisspecificstudy2巳StrategicHedging:CaseQuestionsAccordingtoExhibit1,werethereasignificantumberofportfoliomanagersabletoaddvaluetointerationalportfoliosthroughactive(selective)currencymanagementconsistentlyoverthetimeperiodstudied?。Thetop25thpercenticwereconsistentyabletooutpertornthcmcdianandmcansenifcantywithrespecttoactiverctomu“Howeverthsdoesnotshowthcriskthatnecdedtobeacquiredoracceptedtoachievethoseretums.atleastnotincxbibi1AccordingtoExhibit2.wouldtheinterationalinvestor记anAustraliaportfoliobebetter0作onaveragewithacompletelyhedgedorumhedgedportfolio2。tnetpossibletndctennine芸anintemationaliavestorwoaldbebetteroffbeinghedgedoranhedged。AnAustalian-onlyinvestorwouldavehadaigherreturmnhedged(4445versts3.308).batabigherlevelofiisk(15.60%8verses14.1034)。HeweveranintermationalinvestorwouldbeabletoeducethcyAustralancquiticskbothhedgcdandbnhcdgcdtroughinteationalportfziodiversicationStrategicHedging:CaseQuestions3歪youwereSean,whatwouldyouconcludefromthisspecificstudy2,Seanmayhaveleamedanumberofdifferentthings“Firstthatalthoughaportolioisintenationallydiversified.thatisnotthesamethingas“hedged.“Secondly,thathedgingdoesnot-atleastonthebasisofthedataprovided一guaranteeanybetterorworsereturmsovertime*Seanmightcometothesameconclusionthattraditionalcorporatetreasrershaveformanyyearsthatselectivehedgingmayprotecttefiruortheportiolioffomsignificantlossesinvaluefomumforeseenexctangeratechanges:“Thatsaid.训thelongran训appearstheisksandretumstohedgingdoappeartoaverageout