Cross hedging single stock with American Depositary Receipt and stock index futures
AbstractThis paper investigates the cross hedging effectiveness of individual stock in a market that does not have single stock futures traded using American Depositary Receipt (ADR) and stock index futures. We apply Caporin and Billio's Multivariate regime switching GARCH to capture the state-dependent covariance structure of underlying stock, ADR and stock index futures. Empirical results indicate that in general simultaneous hedging with both ADR and index futures creates hedging gains and incorporating regime switching effects further increases the hedging performances.
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Bibliographic InfoArticle provided by Elsevier in its journal Finance Research Letters.
Volume (Year): 8 (2011)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/frl
Single stock hedging American Depositary Receipt GARCH model Regime switching;
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