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Contribution Details
| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | Currency Hedging: The Perspective of an Equity Investor Based in Switzerland |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 43 |
| Date | 2017 |
| Abstract Text | This thesis examines the effect of currency hedging in the context of an internationally diversified equity investor based in Switzerland. In the first part of the thesis, it is outlined why it is advisable for Swiss investors to internationally diversify the equity portfolio despite the persistent appreciation of the Swiss Franc and the historically high hedging costs. Thereafter, an overview of the theoretical determinants of the hedging decision is presented. In contrast to previous studies, we quantify the impact of currency hedging by calculating a world equity index hedged to Swiss Francs. Over the observation period of 2002 – 2016, the unhedged world index measured in local currency is found to outperform the hedged world index, which in turn dominated the unhedged world index measured in Swiss Francs. Moreover, the analysis unveils substantial spikes in the hedge impact during times of market turmoil. |
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