IDEAS home Printed from
   My bibliography  Save this article

Hedging with Futures: Does Anything Beat the Naïve Hedging Strategy?


  • Yudong Wang

    () (Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200052, China)

  • Chongfeng Wu

    () (Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200052, China)

  • Li Yang

    () (School of Banking and Finance, University of New South Wales, Sydney, New South Wales 2052, Australia)


This paper investigates out-of-sample performance of the naïve hedging strategy relative to that of the minimum variance hedging strategy, in which the covariance parameters are estimated from 18 econometric models. Hedging performance is compared across 24 futures markets. Our main findings suggest that it is difficult to find a strategy under the minimum variance framework that outperforms the naïve hedging strategy both consistently and significantly. Our findings are robust to different sample periods, estimation windows, and hedging horizons and can be partly explained by the effects of estimation error and model misspecification.Data, as supplemental material, are available at . This paper was accepted by Itay Goldstein, finance.

Suggested Citation

  • Yudong Wang & Chongfeng Wu & Li Yang, 2015. "Hedging with Futures: Does Anything Beat the Naïve Hedging Strategy?," Management Science, INFORMS, vol. 61(12), pages 2870-2889, December.
  • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:12:p:2870-2889

    Download full text from publisher

    File URL:
    Download Restriction: no


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

    Cited by:

    1. repec:gam:jsusta:v:10:y:2018:i:2:p:454-:d:131091 is not listed on IDEAS
    2. repec:eee:intfin:v:48:y:2017:i:c:p:61-81 is not listed on IDEAS
    3. repec:eee:phsmap:v:494:y:2018:i:c:p:27-39 is not listed on IDEAS


    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:inm:ormnsc:v:61:y:2015:i:12:p:2870-2889. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.