The Interrelated Behavior of Exchange Rates

In contradiction to classical foreign exchange management, modern portfolio theory has taught that the foreign exchange exposures of the company should not be managed on a currency-by-currency basis, but taking into account the risk diversification effect of holding a diversified portfolio of foreig...

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Bibliographic Details
Published in:	Business economics (Cleveland, Ohio) Vol. 17; no. 4; pp. 37 - 43
Main Author:	Soenen, L.A.
Format:	Journal Article
Language:	English
Published:	Basingstoke National Association of Business Economists 01-09-1982 Springer Palgrave Macmillan
Subjects:	Coefficients Correlation coefficients Correlations Currency Exchange rates Financial portfolios Fluctuations Foreign exchange Foreign exchange rates International economic relations International financial management International trade Management
Online Access:	Get full text
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Summary:	In contradiction to classical foreign exchange management, modern portfolio theory has taught that the foreign exchange exposures of the company should not be managed on a currency-by-currency basis, but taking into account the risk diversification effect of holding a diversified portfolio of foreign currencies. This article summarizes the results of an empirical study of the degree and stability of correlation between movements of exchange rates with respect to a base-currency (i.e. U.S. dollar and Dutch guilder). An analysis is also made of the effect of outline or period deletion on reported correlation patterns.
ISSN:	0007-666X 1554-432X