Currency risk and international property investments
Journal of Property Valuation and Investment
ISSN: 0960-2712
Article publication date: 1 December 1995
Abstract
Incorporating exchange rate fluctuations into the analysis of an international investment substantially alters the expected risk and return characteristics of the investments. With fluctuating rates, the value of a successful investment property could be devastated when converted to the investor′s home currency. This risk should be recognized and incorporated into the investment decision but, as results show, the ultimate strategy may not be periodic adjustments which have been used by many researchers, nor trying to hedge fully as others have suggested, but rather to examine returns in home market currency and leave exchange rate exposure decisions to the currency portfolio managers. Explores the possibilities of mitigating currency risk through several hedging instruments – forward and futures contracts, options, back‐to‐back loans and currency swaps. Results from a survey of international investors are also summarized and comments provide substantial evidence that investors are unsophisticated in dealing with currency questions.
Keywords
Citation
Worzala, E. (1995), "Currency risk and international property investments", Journal of Property Valuation and Investment, Vol. 13 No. 5, pp. 23-38. https://doi.org/10.1108/14635789510147810
Publisher
:MCB UP Ltd
Copyright © 1995, MCB UP Limited