Short-Term Foreign Assets and Portfolio Risk

Arthur Raymond
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Arthur Raymond: Muhlenberg College

Eastern Economic Journal, 1995, vol. 21, issue 3, 327-37

Abstract: This study addresses the effect of exchange-rate changes on short-term asset portfolios. If foreign exchange-rate changes and domestic inflation are not independent, then two principal results emerge. First, foreign short-term assets, exposed to exchange risk, may be less risky than foreign short-term assets that are covered in the forward market. Second, a portfolio containing both domestic short-run assets and foreign short-run assets, exposed to exchange risk, will always have less portfolio risk than a portfolio of either domestic short-term assets, or foreign short-run assets covered in the forward market.

Keywords: Portfolio (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:21:y:1995:i:3:p:327-337

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