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Efficient Risk Reducing Strategies by International Diversification: Evidence from a Central European Emerging Market

Author

Listed:
  • Maurer, Raimond

    (Lehrstuhl fuer Investment, Portfolio Management und Alterssicherung)

  • Bugàr, Gyöngyi

    (Janus Pannonius University of Pécs, Faculty of Business and Economics)

Abstract

In this paper, we study the benefits derived from the international diversification of stock portfo-lios from the Hungarian point of view. The Hungarian Stock Exchange is an emerging market, which reopened its floor on June 21, 1990 as a consequence of the so-called transition process having gone on in Eastern and Central Europe in the past decade. The stock market in Hungary is highly volatile, high returns are often accompanied by extremely large risk. Therefore, there is a good potential for Hungarian investors to realize substantial benefits in terms of risk reduction by creating multi-currency portfolios. The paper gives evidence on the above mentioned benefits by examining the performance of several ex ante portfolio strategies. In order to control the currency risk three different types of hedging strategies are implemented.

Suggested Citation

  • Maurer, Raimond & Bugàr, Gyöngyi, 1999. "Efficient Risk Reducing Strategies by International Diversification: Evidence from a Central European Emerging Market," Sonderforschungsbereich 504 Publications 99-88, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:99-88
    Note: Financial Support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    Cited by:

    1. Bugar, Gyöngyi & Maurer, Raimond, 2001. "International equity portfolios and currency hedging : the viewpoint of German and Hungarian investors," Papers 01-10, Sonderforschungsbreich 504.
    2. Bugàr, Gyöngyi & Maurer, Raimond, 2001. "International Equity Portfolios and Currency Hedging: The Viewpoint of German and Hungarian Investors," Sonderforschungsbereich 504 Publications 01-10, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.

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