The Superiority of Time-Varying Hedge Ratios in Turkish Futures
AbstractThis paper aims to compare the effectiveness of constant hedge ratio estimates (obtained through OLS and VECM methods) and time-varying hedge ratio estimates (obtained via M-GARCH method) for future contracts of ISE-30 index of TurkDEX. We use portfolio variance reduction as the measure of hedging effectiveness. We find that time-varying hedge ratios outperform the constant ratios for both in-sample and out-of-sample datasets and provide the minimum variance values.
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Bibliographic InfoPaper provided by Izmir University of Economics in its series Working Papers with number 0907.
Length: 15 pages
Date of creation: Nov 2009
Date of revision:
Futures Pricing; Hedging; MGARCH; Hedging Effectiveness;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-27 (All new papers)
- NEP-ARA-2009-11-27 (MENA - Middle East & North Africa)
- NEP-CWA-2009-11-27 (Central & Western Asia)
- NEP-FMK-2009-11-27 (Financial Markets)
- NEP-RMG-2009-11-27 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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