Open Access Article SciPap-846
Assessment of the Effect of Exchange Rate Hedging Costs on the Performance of Collective Investment Funds (Case Study)
by Daniela Pfeiferová 1,*, Ivana Kuchařová 2 and Marie Prášilová 3

1 Provozně ekonomická fakulta Katedra obchodu a financí, Česká zemědělská univerzita v Praze, Kamýcká 129, Praha 6 - Suchdol 165 21, Czechia

2 Provozně ekonomická fakulta Katedra obchodu a financí, Česká zemědělská univerzita v Praze, Kamýcká 129, Praha 6 - Suchdol 165 21, Czechia

3 Provozně ekonomická fakulta, Katedra statistiky, Česká zemědělská univerzita v Praze, Kamýcká 129, Praha 6 - Suchdol 165 21, Czechia

* Authors to whom correspondence should be addressed.

Abstract: The aim of this paper is to evaluate whether the exchange rate hedging costs at collective investment companies affects the performance of these entities. The evaluation is based on a correlation in time series. Exchange rate risk is related to the position of CZK as the reference currency of the target group (households and institutions), to which investment companies sell their securities. The theoretical part of this paper is based on professional studies in the area of performance measurement and risk elimination in collective investment funds. Data were collected on the development of monthly costs to secure exchange risks and on the performance of mutual funds between April 2012 and April 2015. Correlation in time series was used to assess the relationship between the performance of mutual funds and the cost of exchange rate risk hedging. The statistical methods did not prove dependence between exchange rate hedging costs and the monthly performance of selected mutual funds. Correlation coefficients are low and insignificant, so specific information about the costs of the interest rate risk hedging is currently not necessary. This issue has not been researched adequately so far, thus the results may serve as a base for further scientific research.

Keywords: Performance, Risk, Collective Investment, Currency, Hedging, Investment Companies, Mutual Funds

JEL classification:   C20 - General,   G11 - Portfolio Choice • Investment Decisions,   G23 - Non-bank Financial Institutions • Financial Instruments • Institutional Investors,   G24 - Investment Banking • Venture Capital • Brokerage • Ratings and Ratings Agencies,   G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill

SciPap 2017, 25(1), 846

Received: 1 September 2016 / Accepted: 20 March 2017 / Published: 12 April 2017