Global risk sentiment and the Swiss franc: A time-varying daily factor decomposition model

Fink, Fabian; Frei, Lukas; Gloede, Oliver

doi:10.1016/j.jimonfin.2021.102539

Cited by 3 publications

(4 citation statements)

References 33 publications

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“…Although all currencies denote strong defensive powers, the US dollar and the Swiss franc emerge as top performers hedging instruments. Overall, this empirical evidence is in line with a large proportion of the recent work surveyed in Section 2, which draws on a large set of different econometric approaches (Lee 2017;Chan et al 2018;Cho and Han 2021;Tachibana 2022;Fink et al 2022).…”

Section: Empirical Evidencesupporting

confidence: 80%

“…Using a simple regression approach with crises dummies, Kopyl and Lee (2016) showed that the yen stands out as one of the strongest safe-haven investments over a long time-span (1964-2014). Using a factor model to decompose short-term exchangerate dynamics, Fink et al (2022) highlighted the role of the Swiss franc as a safe-haven currency. Other quantitative contributions found that the above currencies simultaneously qualify as safe-haven currencies using various Markov-Switching approaches (Lee 2017;Balcilar et al 2020).…”

mentioning

confidence: 99%

“…Tachibana (2022) provides a recent example of research exploring the safe haven properties of various assets in international stocks portfolios using nominal effective exchange rates relative to a large number of developed economies. In a similar vein, Fink et al (2022) use both bilateral and effective exchange rates of some major currencies (Euro, US dollar) to model different global factors driving Swiss franc dynamics during the last decades.…”

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confidence: 99%

See 2 more Smart Citations

Safe-Haven Currencies as Defensive Assets in Global Stocks Portfolios: A Reassessment of the Empirical Evidence (1999–2022)

Tronzano

2023

JRFM

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This paper reassessed the hedging properties of four major safe-haven currencies (US dollar, Swiss franc, euro, yen) in international stock portfolios covering most representative world macroeconomic areas. The main contribution to the existing literature is the emphasis on optimal hedging and asset-allocation strategies. A further distinguishing feature is an accurate comparison, inside a multivariate framework, between value-at-risk simulations assuming equal or optimal asset weights in hedged global stock portfolios. The US dollar stands out as the best safe-haven currency, while adding the US currency to single-hedged global stock portfolios including either the Swiss franc or the euro yields smooth risk profiles during major financial crises, and average risk indicators lower than that of a benchmark fully hedged portfolio.

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Section: Empirical Evidencesupporting

confidence: 80%

mentioning

confidence: 99%

mentioning

confidence: 99%

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Safe-Haven Currencies as Defensive Assets in Global Stocks Portfolios: A Reassessment of the Empirical Evidence (1999–2022)

Tronzano

2023

JRFM

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“…The strong evidence in support of the Swiss Franc as an important safe haven currency involves all latest empirical contributions. Quite interestingly, this research relies on a variety of methodological approaches, ranging from cross-quantilogram analysis (Cho and Han 2021) to time-varying factor decomposition models (Fink et al 2022) and a regimeswitching factor copula approach, implemented on a large number of assets and developed and emerging stock markets (Tachibana 2022).…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal Portfolio Allocation between Global Stock Indexes and Safe Haven Assets: Gold versus the Swiss Franc (1999–2021)

Tronzano

2022

JRFM

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This paper contributes to the literature on safe haven assets, analyzing gold and the Swiss Franc’s defensive properties inside various global stocks portfolios. The analysis relies on monthly data extending over the last two decades. Drawing on Multivariate Garch DCC models, the hedging effectiveness of bivariate Swiss Franc-hedged portfolios is found to be notably higher than that of gold-hedged portfolios. Value-at-Risk simulations, assuming equal or “optimal” portfolio weights, confirm these results inside a multivariate asset framework, while a regression approach with quantile dummies provides further support in this regard. Since the better hedge and safe haven properties of the Swiss Franc are likely to persist in the future, the main policy implication of the paper concerns asset allocation strategies giving relatively more weight to the Swiss currency in global stock portfolios.

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The Trend Effect of Foreign Exchange Intervention

Fatum,

Yamamoto,

Chen

2024

Preprint

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Global risk sentiment and the Swiss franc: A time-varying daily factor decomposition model

Cited by 3 publications

References 33 publications

Safe-Haven Currencies as Defensive Assets in Global Stocks Portfolios: A Reassessment of the Empirical Evidence (1999–2022)

Safe-Haven Currencies as Defensive Assets in Global Stocks Portfolios: A Reassessment of the Empirical Evidence (1999–2022)

Optimal Portfolio Allocation between Global Stock Indexes and Safe Haven Assets: Gold versus the Swiss Franc (1999–2021)

The Trend Effect of Foreign Exchange Intervention

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