Note on Currency Hedging of foreign assets of Swiss Investors 1974-2021

Peter Kugler

Working papers from Faculty of Business and Economics - University of Basel

Abstract: This paper contains cointegration estimates for the spot and forward Swiss franc exchange rates against US dollar, British pound, euro (DM) and yen using monthly data from 1974 to 2021. We find evidence for a small negative but highly statistically significant bias of the forward rate as spot rate predictor for the pound. For dollar and DM we see a similar result, albeit lower in size and statistical significance, whereas for euro and yen no such bias appears. These results suggest that to forgo currency hedging may favorable for the Swiss franc value of primarily pound and secondarily dollar investments. However, this effect is no longer statistically significant when we estimate a cointegrating regression between the unhedged and hedged franc value of investments in the British, US, European and Japanese stock market over the last 30 years. Given these findings and the limited potential to reduce the franc variability of foreign currency investments in the long run, currency hedging appears as a questionable strategy for Swiss investors.

JEL-codes: F21 F31 G15 (search for similar items in EconPapers)
Date: 2026-05-01
New Economics Papers: this item is included in nep-his, nep-ifn and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bsl:wpaper:2026/02

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