Portfolio performance and the Euro: Prospects for new potential EMU members
Entering the EMU removes currency risk for assets originating in the Euro area while diversification opportunities are likely reduced. Taking the perspective of an investor in one of the 12 countries that joined the EU in 2004-2007, we contrast actual optimal composition of international equity holdings against two artificial scenarios: costless hedging against exchange rate risk and presuming the local market to be part of the EMU. State specific optimal portfolios are determined from realized covariances for the period 2000-2006. Optimized risk is found smaller under currency unification and implied Sharp ratios signal significant benefits of EMU participation.
Year of publication: |
2008
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Authors: | Haselmann, Rainer ; Herwartz, Helmut |
Published in: |
Journal of International Money and Finance. - Elsevier, ISSN 0261-5606. - Vol. 27.2008, 2, p. 314-330
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Publisher: |
Elsevier |
Saved in:
Online Resource
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