Back
 JMF  Vol.3 No.3 A , October 2013
The Hidden Risk Factor
Abstract: To achieve maximum returns consistent with an investor’s appetite for risk, the correct identification and estimation of all relevant risk factors in a portfolio are necessary. In this paper, we identify the role of foreign currency as an important risk factor from an international investor’s point of view.
Cite this paper: J. Witte, D. Ples and J. Corominas, "The Hidden Risk Factor," Journal of Mathematical Finance, Vol. 3 No. 3, 2013, pp. 21-26. doi: 10.4236/jmf.2013.33A003.
References

[1]   S. Page and M. Taborsky, “The Myth of Diversification: Risk Factors versus Asset Classes,” Journal of Portfolio Management, Vol. 37, No. 4, 2011, pp. 1-2. http://dx.doi.org/10.3905/jpm.2011.37.4.001

[2]   D. Rosen and D. Saunders, “Risk Factor Contributions in Portfolio Credit Risk Models,” Journal of Banking and Finance, Vol. 34, No. 2, 2010, pp. 336-349. http://dx.doi.org/10.1016/j.jbankfin.2009.08.002

[3]   J. Lintner, “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets,” The Review of Economics and Statistics, Vol. 47, No. 1, 1965, pp. 13-39. http://dx.doi.org/10.2307/1924119

[4]   O. Ruban and D. Melas, “Risk Parity Portfolios: Rebalance, Leverage, Or Both?” The Journal of Investing, Vol. 20, No. 1, 2011, pp. 99-108. http://dx.doi.org/10.3905/joi.2011.20.1.099

[5]   H. M. Markowitz, “Portfolio Selection,” The Journal of Finance, Vol. 7, No. 1, 1952, pp. 77-91.

[6]   H. M. Markowitz, “Portfolio Selection: Efficient Diversification of Investments,” John Wiley & Sons, New York, 1958.

[7]   J. Diermeier and B. Solnik, “Global Pricing of Equity,” Financial Analysts Journal, Vol. 57, No. 4, 2001, pp. 37-47. http://dx.doi.org/10.2469/faj.v57.n4.2464

[8]   J.-F. L’Her, O. Sy and M. Y. Tnan, “Country, Industry, and Risk Factor Loadings in Portfolio Management,” The Journal of Portfolio Management, Vol. 28, No. 4, 2002, pp. 70-79. http://dx.doi.org/10.3905/jpm.2002.319856

[9]   G. De Santis and B. Gerard, “How Big Is the Premium for Currency Risk?” Journal of Financial Economics, Vol. 49, No. 3, 1998, pp. 375-412. http://dx.doi.org/10.1016/S0304-405X(98)00029-4

[10]   A. S. Cherny and D. B. Madan, “Coherent Measurement of Factor Risks,” 2006. http://arxiv.org/abs/math/0605062v1

[11]   J. Bender, R. Briand, F. Nielsen and D. Stefek, “Portfolio of Risk Premia: A New Approach to Diversification,” The Journal of Portfolio Management, Vol. 36, No. 2, 2010, pp. 17-25. http://dx.doi.org/10.3905/JPM.2010.36.2.017

[12]   S. Maillard, T. Roncalli and J. Teiletche, “On the Properties of Equally-Weighted Risk Contributions Portfolios,” The Journal of Portfolio Management, Vol. 36, No. 4, 2010, pp. 60-70. http://dx.doi.org/10.3905/jpm.2010.36.4.060

[13]   MSCI Barra, “Barra Risk Model Handbook,” 2007.

[14]   C. R. Harvey, “The Risk Exposure of Emerging Equity Markets,” The World Bank Economic Review, Vol. 9, No. 1, 1993, pp. 19-50. http://dx.doi.org/10.1093/wber/9.1.19

 
 
Top