IDEAS home Printed from https://ideas.repec.org/a/vrs/seejeb/v6y2011i1p111-123n10.html
   My bibliography  Save this article

The Hedging Effectiveness of Stock Index Futures: Evidence for the S&P CNX Nifty Index Traded in India

Author

Listed:
  • Pradhan Kailash

    (National Council of Applied Economic Research (NCAER), New Delhi-110002)

Abstract

This study evaluates optimal hedge ratios and the hedging effectiveness of stock index futures. The optimal hedge ratios are estimated from the ordinary least square (OLS) regression model, the vector autoregression model (VAR), the vector error correction model (VECM) and multivariate generalized autoregressive conditional heteroskedasticity (M-GARCH) models such as VAR-GARCH and VEC-GARCH using the S&P CNX Nifty index and its futures index. Hedging effectiveness is measured in terms of within sample and out of sample risk-return trade-off at various forecasting horizons. The analysis found that the VEC-GARCH time varying hedge ratio provides the greatest portfolio risk reduction and generates the highest portfolio returns.

Suggested Citation

  • Pradhan Kailash, 2011. "The Hedging Effectiveness of Stock Index Futures: Evidence for the S&P CNX Nifty Index Traded in India," South East European Journal of Economics and Business, Sciendo, vol. 6(1), pages 111-123, April.
    • Handle: RePEc:vrs:seejeb:v:6:y:2011:i:1:p:111-123:n:10
    DOI: 10.2478/v10033-011-0010-2
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/v10033-011-0010-2
    Download Restriction: no
    File URL: https://libkey.io/10.2478/v10033-011-0010-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mandeep Kaur & Kapil Gupta, 2019. "Estimating Hedging Effectiveness Using Variance Reduction And Risk-Return Approaches: Evidence From National Stock Exchange Of India," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(4), pages 149-169.
    2. Babu Jose & Nithin Jose, 2023. "Is Cross-Hedging Effective for Mitigating Equity Investment Risks in the Indian Banking Sector?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 189-210, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:seejeb:v:6:y:2011:i:1:p:111-123:n:10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.