Selective Hedging, Information Asymmetry, and Futures Prices
AbstractEvidence from hedging practices suggests that firms will hedge only if they expect that unfavorable events will arise. In markets with a significant degree of information asymmetry in which hedgers are oligopolists with superior knowledge concerning supply and demand, such as oil and gas futures, we contend that these companies will selectively hedge price movements, causing sharp price adjustments upon resolution of information asymmetry. Using aggregate analysts' surprise as a proxy for the degree of information asymmetry, we show that positive aggregate surprises lead to a price decline for futures, which indicates that these firms unload their futures when the outlook is favorable.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 79 (2006)
Issue (Month): 3 (May)
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- Tansuchat, R. & Chang, C-L. & McAleer, M.J., 2010.
"Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH,"
Econometric Institute Research Papers
EI 2010-10, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2011. "Crude oil hedging strategies using dynamic multivariate GARCH," Energy Economics, Elsevier, Elsevier, vol. 33(5), pages 912-923, September.
- Roengchai Tansuchat & Chia-Lin Chang & Michael McAleer, 2010. "Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-704, CIRJE, Faculty of Economics, University of Tokyo.
- Chia-Lin Chang & Michael McAleer & Roengchai Tansuchat, 2010. "Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH," KIER Working Papers 743, Kyoto University, Institute of Economic Research.
- Roengchai Tansuchat & Chia-Lin Chang & Michael McAleer, 2010. "Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH," Working Papers in Economics, University of Canterbury, Department of Economics and Finance 10/03, University of Canterbury, Department of Economics and Finance.
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