Portfolio strategies for hedging against rand weakness

G D I Barr, C G Holdsworth and B S Kantor

South African Journal of Accounting Research, 2007, vol. 21, issue 1, 81-101

Abstract: This paper considers how portfolios may be structured which provide protection against Rand exchange rate movement and, in particular, against Rand weakness. Two portfolio optimisation methods are used to estimate the portfolio weights of the Top 40 shares listed on the Johannesburg Stock Exchange (JSE) which provide the maximum protection against some pre-defined expectation of Rand weakness. The performance of these Rand-hedge portfolios is then compared to that of the Itrix FTSE 100 Exchange Traded fund (ETF) which mimics the London-based FTSE 100. While the portfolios based on the JSE Top 40 components provide slightly less Rand hedge protection than the Itrix FTSE 100 ETF, they are still able to provide a very effective exchange rate hedge. Moreover, they are also able to provide greater exposure to the South African market and this has resulted in a significant performance advantage over the Itrix FTSE 100 over the last five years.

Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10291954.2007.11435127 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rsarxx:v:21:y:2007:i:1:p:81-101

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rsar20

DOI: 10.1080/10291954.2007.11435127

Access Statistics for this article

South African Journal of Accounting Research is currently edited by Soon Nel

More articles in South African Journal of Accounting Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().