Efficiency and hedging effectiveness in the NYMEX crude oil futures market
AbstractThis study aims to investigate the speculative efficiency of the New York Mercantile Exchange (NYMEX) Light Sweet Crude Oil futures market and the effectiveness of these futures contracts in hedging the West Texas Intermediate (WTI) crude oil price risk. The period of interest ranges between October 2001 and August 2006, coinciding with the beginning of an oil price surge following the low-price period of the 1980s and 1990s. Our empirical findings imply that the NYMEX futures market is not an efficient market in the Fama sense for the October 2001-August 2006 period. Moreover, although the time-varying ratios are found to be slightly above the constant one in most of the sample period, the relative hedging effectiveness values based on the portfolio variances of the two hedge ratios are not different from each other in statistical terms.
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Bibliographic InfoArticle provided by Bilgesel Yayincilik in its journal İktisat İşletme ve Finans.
Volume (Year): 26 (2011)
Issue (Month): 308 ()
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Hedging; Hedge Ratio; Crude Oil Futures; Bivariate GARCH;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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