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Optimal Hedge Ratios at the Winnipeg Commodity Exchange

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  • Peter S. Sephton

Abstract

Multivariate GARCH models are employed to estimate time-varying hedge ratios for three commodities traded on the Winnip eg Commodity Exchange. GARCH hedge ratios are shown to be superior to those based on the traditional regression approach to calculating th e optimal hedge.

Suggested Citation

  • Peter S. Sephton, 1993. "Optimal Hedge Ratios at the Winnipeg Commodity Exchange," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 175-193, February.
  • Handle: RePEc:cje:issued:v:26:y:1993:i:1:p:175-93
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    Citations

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    Cited by:

    1. Jian Yang & Titus Awokuse, 2003. "Asset storability and hedging effectiveness in commodity futures markets," Applied Economics Letters, Taylor & Francis Journals, vol. 10(8), pages 487-491.
    2. Rocha, Waldemar Antonio da & Caldarelli, Carlos Eduardo, 2010. "The Dynamic Hedging Effectiveness For Soybean Farmers Of Mato Grosso With Futures Contracts Of Bm&F," Organizacoes Rurais e Agroindustriais/Rural and Agro-Industrial Organizations, Universidade Federal de Lavras, Departamento de Administracao e Economia, vol. 12(1).
    3. repec:eee:eneeco:v:63:y:2017:i:c:p:92-105 is not listed on IDEAS
    4. Michael S. Haigh & Matthew T. Holt, 2002. "Combining time-varying and dynamic multi-period optimal hedging models," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(4), pages 471-500, December.
    5. Jonathan Dark, 2004. "Long term hedging of the Australian All Ordinaries Index using a bivariate error correction FIGARCH model," Monash Econometrics and Business Statistics Working Papers 7/04, Monash University, Department of Econometrics and Business Statistics.
    6. McKenzie, Michael D. & Brooks, Robert D. & Faff, Robert W. & Ho, Yew Kee, 2000. "Exploring the economic rationale of extremes in GARCH generated betas The case of U.S. banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(1), pages 85-106.
    7. Chen, Sheng-Syan & Lee, Cheng-few & Shrestha, Keshab, 2003. "Futures hedge ratios: a review," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(3), pages 433-465.
    8. Gagnon, Louis & Lypny, Gregory J. & McCurdy, Thomas H., 1998. "Hedging foreign currency portfolios," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 197-220, September.
    9. H. N. E. BystrOm, 2003. "The hedging performance of electricity futures on the Nordic power exchange," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 1-11.
    10. Choudhry, Taufiq, 2009. "Short-run deviations and time-varying hedge ratios: Evidence from agricultural futures markets," International Review of Financial Analysis, Elsevier, vol. 18(1-2), pages 58-65, March.
    11. P. J. Dawson & A. L. Tiffin & B. White, 2000. "Optimal Hedging Ratios for Wheat and Barley at the LIFFE: A GARCH Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 147-161.
    12. Watt, D.G.M., 1997. "Canadian Short-Term Interest Rates and the BAX Futures Markets: An Analysis of the Impact of Volatility on Hedging Activity and the Correlation of Returns Between Markets," Staff Working Papers 97-18, Bank of Canada.
    13. Bessler, Wolfgang & Leonhardt, Alexander & Wolff, Dominik, 2016. "Analyzing hedging strategies for fixed income portfolios: A Bayesian approach for model selection," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 239-256.
    14. Bessler, Wolfgang & Wolff, Dominik, 2014. "Hedging European government bond portfolios during the recent sovereign debt crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 379-399.
    15. Anton Bekkerman, 2011. "Time-varying hedge ratios in linked agricultural markets," Agricultural Finance Review, Emerald Group Publishing, vol. 71(2), pages 179-200, August.
    16. Chang Dan & Hong Gu & Kuan Xu, 2005. "The Impact of Hedging on Stock Return and Firm Value: New Evidence from Canadian Oil and Gas Companies," Department of Economics at Dalhousie University working papers archive hedging, Dalhousie, Department of Economics.

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