Prof. Richard Levich on Currency Risk

Richard Levich, NYU Stern Professor of Finance and International Business, was quoted in BBC news, regarding discussions on the currency risk involved when investing in multinational corporations. Andrea Murad of BBC Capital writes:

“Americans typically do not trade currencies, also called foreign exchange, while in other countries, individual investors are well-versed in currencies, said chartered financial analyst Ron Rimkus, director of Economics & Alternative Investments at the CFA Institute in Charlottesville, Virginia. In Asia, for instance, people speculate on currency by trading against central bank activity, which requires a strong degree of risk tolerance and sophistication.

But whether they know it or not, American investors often carry plenty of hidden currency risk in their portfolios, such as through many popular mutual funds. Through shares in emerging market companies or US multinationals, like McDonald’s Corp or Apple Inc, American investors have more exposure to the dynamics of foreign economies than they realize.

“[Investors] get a lot of exposure to currency indirectly by buying equities and bonds,” said Richard Levich, professor of finance and international business at New York University’s Stern School of Business.”

Read the entire article.

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