Hedging currency risk: Does it have to be so complicated?

The question of whether foreign investments should be systematically hedged against currency risk has not been clearly answered to date. Numerous theoretical and empirical studies have provided contradictory conclusions. This paper examines to what extent foreign bonds and equities are exposed to currency risk. Risk and return of different strategies are aggregated over five reference currencies for a period from 1985 to 2000. The advantage of this method is that the results do not depend much on the time period chosen. Empirical evidence confirms the hypothesis that currency hedging should be fully applied to foreign bonds, whereas foreign equities should not or only be partially hedged.Currency risk; hedging; fixed income; equity; optimal hedge ratio

Corporate Aging and Takeover Risk

Although growth opportunities fade and profitability declines as firms mature, older firms are no more likely to be acquired than young firms are. This article documents and explains that phenomenon. We argue that, because mature organizations are rationally less flexible, they are more costly to integrate and therefore comparatively unattractive acquisition candidates. The evidence supports this explanation of the negative age dependence of takeover hazard. The evidence also shows that negative exogenous shocks to merger benefits further reduce the takeover hazard of mature firms. We test many alternative explanations and find no evidence that they can explain the hazard declin

Hedging currency risk: Does it have to be so complicated?

The question of whether foreign investments should be systematically hedged against currency risk has not been clearly answered to date. Numerous theoretical and empirical studies have provided contradictory conclusions. This paper examines to what extent foreign bonds and equities are exposed to currency risk. Risk and return of different strategies are aggregated over five reference currencies for a period from 1985 to 2000. The advantage of this method is that the results do not depend much on the time period chosen. Empirical evidence confirms the hypothesis that currency hedging should be fully applied to foreign bonds, whereas foreign equities should not or only be partially hedged

Protecting Minority Shareholders: Listed versus Unlisted Firms

"Listed firms have an incentive to render themselves attractive to investors at large. This paper examines whether listed and unlisted firms differ in their care for minority shareholders and finds supporting evidence. We examine control structure, disclosure, board architecture and processes, and director compensation. The corporate governance package in listed firms differs from that in unlisted firms in terms of levels and mix of the different provisions. The data also suggest that listed firms perform better." Copyright (c) 2010 Financial Management Association International.