Do backtesting tools, such as Portfolio Visualizer, reflect currency risk?

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foodhype
Posts: 127
Joined: Thu May 25, 2017 10:38 pm

Do backtesting tools, such as Portfolio Visualizer, reflect currency risk?

Post by foodhype » Tue Sep 11, 2018 11:33 pm

Suppose I do a typical backtest of the global ex-U.S. stock market asset class, or an unhedged ETF tracking that asset class, such as VXUS. Will the standard deviation and visual chart include the currency risk?

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privatefarmer
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Re: Do backtesting tools, such as Portfolio Visualizer, reflect currency risk?

Post by privatefarmer » Tue Sep 11, 2018 11:39 pm

wouldn't this be reflected in the rate of inflation? if the dollar weakens, inflation should rise, and that is reflected in PV

HEDGEFUNDIE
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Re: Do backtesting tools, such as Portfolio Visualizer, reflect currency risk?

Post by HEDGEFUNDIE » Tue Sep 11, 2018 11:42 pm

Everything in PV is denominated in USD, so yes you are seeing the full effect of foreign currency risk.

foodhype
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Re: Do backtesting tools, such as Portfolio Visualizer, reflect currency risk?

Post by foodhype » Tue Sep 11, 2018 11:47 pm

HEDGEFUNDIE wrote:
Tue Sep 11, 2018 11:42 pm
Everything in PV is denominated in USD, so yes you are seeing the full effect of foreign currency risk.
Does that only apply when using "inflation adjusted"?

HEDGEFUNDIE
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Re: Do backtesting tools, such as Portfolio Visualizer, reflect currency risk?

Post by HEDGEFUNDIE » Tue Sep 11, 2018 11:52 pm

foodhype wrote:
Tue Sep 11, 2018 11:47 pm
HEDGEFUNDIE wrote:
Tue Sep 11, 2018 11:42 pm
Everything in PV is denominated in USD, so yes you are seeing the full effect of foreign currency risk.
Does that only apply when using "inflation adjusted"?
No, it has nothing to do with inflation adjusted. Inflation adjusted applies an extra adjustment on top of all the numbers.

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