If stock prices and currencies move randomly with respect to each other, you would expect currency - hedged funds to underperform at certain time periods and outperform in other time periods (reader Avon Barksdale made this point in
Why Currency Hedging is Necessary).
In a detailed post last week (see post
Why Currency Hedging is Necessary), reader Avon explained how foreign stocks are much riskier when one considers the effect of exchange rate fluctuations.
Not exact matches
2003 - 2005:
Why would I ever
hedge the foreign
currency impact on my international stocks?
We discuss
why, where and how to
hedge currency risk — and outline our approach in taking active foreign exchange (FX) risk.
Why does
currency hedging underperform so much?
For then the world might understand
why even at its recent price above $ 1,300 per ounce gold has not come close to keeping up with the inflation, the
currency debasement, of the last few decades,
why gold has not fulfilled its function of
hedging against inflation.
This is
why I don't recommend
currency hedging.
@CC:
Why does investing in investment - grade foreign bonds (with
currency hedging) raise the risk of a portfolio?
Not long ago, index investors were asking
why it was so hard to find an international equity ETF without
currency hedging, but iShares changed that in April with launch of the iShares MSCI EAFE IMI (XEF).
In this final post in the series on
why international index funds performed so poorly in 2009, it's time to look at
currency hedging.
I'm not sure
why, but US - listed ETFs tend not to use
currency hedging for international equities.
The reason
why many financial institutions don't
hedge currency risk is that they don't
hedge currency risk.
This is
why paying for
currency hedging in international funds is a dubious strategy: to some extent the
currencies hedge themselves and actually provide some diversification benefit.
That's
why I think Canadian listed foreign ETFs without
currency hedging would be really welcome.
It is often asked
why currency -
hedged funds have exhibited such horrendous tracking errors.
*
Why * did the
currency -
hedged portfolio underperform if the Canadian dollar appreciated 19 %?
I've learned a bunch about
currency -
hedging (and
why I won't change my ways, to move to any
currency -
hedging) in large part because of your posts.
It turns out that the bulk of the blame can be attributed to the tendency of stocks and
currencies to move in opposite directions (See post
Why Currency -
Hedged Funds have Large Tracking Errors).
Why would one wants to
hedge a
currency with a positive real interest rate against one with a negative real interest rate?