On the Rewards to International Investing: A Safe Haven Currency Perspective

Jean-Pierre Danthine (1, 2, 3, 4) , Samuel Danthine (5)

1 CEPR - Center for Economic Policy Research
2 UNIL - Université de Lausanne = University of Lausanne
3 PJSE - Paris Jourdan Sciences Economiques
4 PSE - Paris School of Economics
5 ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz]

The safe haven property of the Swiss franc presents a specific challenge for Swiss-based investors in their international investments. The central issue is whether the traditional under performance of Swiss assets is compensated by the currency risk associated with the safe haven and the secular appreciation tendency of the franc. In this paper we review the evidence on the terms of this challenge. We conclude that long-run Swiss-based investors are well compensated for the currency risks they take on, 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.

Mots clés: Uncovered Interest Parity; Safe haven currency; currency hedging

Domaines: Economies et finances

Jean-Pierre Danthine, Samuel Danthine. On the Rewards to International Investing: A Safe Haven Currency Perspective. 2017. ⟨halshs-01571641⟩