Recent studies show that when investors control exchange risk by using currency forward contracts, . Group of answer choices they can substantially enhance the efficiency of international bond portfolios they can substantially enhance the efficiency of international stock portfolios they can substantially enhance the efficiency of international bond and stock portfolios the risk of investing in foreign stock markets can be completely hedged

they can substantially enhance the efficiency of international bond portfolios.

Explanation:

Foreign exchange market can be defined as type of market in which the currency of one country is converted into that of another country.

For example, the conversion of dollars of the United States of America can be converted into naira (Nigeria) at the foreign exchange market.

Efficient market school is the market school which argues that forward exchange rates do the best possible job for forecasting future spot exchange rates, so investing in exchange rate forecasting services would be a waste of time because it is impossible to have a consistent alpha generation on a risk adjusted excess returns basis as market prices are only affected by new informations.

The efficient market school also known as the efficient market hypothesis (EMH) is a hypothesis that states that asset (share) prices reflect all information and it is very much impossible to consistently beat the market.

Also, forward exchange rates are exchange rates controlling foreign exchange transactions at a specific future date or time.

Recent studies show that when investors control exchange risk by using currency forward contracts, they can substantially enhance the efficiency of international bond portfolios.

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