Hedging effectiveness under conditions of asymmetry
AbstractWe examine whether hedging effectiveness is affected by asymmetry in the return distribution by applying tail-specific metrics, for example, value at risk, to compare the hedging effectiveness of short and long hedgers. Comparisons are applied to a number of hedging strategies including OLS and both symmetric and asymmetric generalised autoregressive conditional heteroskedastic models. We apply our analysis to a dataset consisting of S&P500 index cash and futures containing symmetric and asymmetric return distributions chosen ex post . Our findings show that asymmetry reduces out-of-sample hedging performance and that significant differences occur in hedging performance between short and long hedgers.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The European Journal of Finance.
Volume (Year): 18 (2012)
Issue (Month): 2 (February)
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Other versions of this item:
- John Cotter & Jim Hanly, 2011. "Hedging Effectiveness under Conditions of Asymmetry," Papers 1103.5411, arXiv.org.
- Cotter, John & Hanly, James, 2007. "Hedging Effectiveness under Conditions of Asymmetry," MPRA Paper 3501, University Library of Munich, Germany.
- John Cotter & Jim Hanly, 2011. "Hedging Effectiveness under Conditions of Asymmetry," Working Papers 200843, Geary Institute, University College Dublin.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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