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Evidence on Hedging Effectiveness in Indian Derivatives Market

  • Barik Kumar

    ()

  • M. Supriya

    ()

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    The hedging effectiveness for bank futures and CNX nifty are evaluated in this study. The study is based on 9,569 observations of the daily data for these index futures. For evaluation ordinary least square, co-integrated ordinary least square, generalized auto-regressive conditional heteroscedasticity (1, 1), and constant correlation generalized auto-regressive conditional heteroscedasticity (1, 1) hedging methods are estimated and compared. Result shows that constant correlation generalized auto-regressive conditional heteroscedasticity (1, 1) is an efficient hedging method that maximizes investors’ utility function considering transaction costs. Therefore, investors can rely on this constant correlation generalized auto-regressive conditional heteroscedasticity (1, 1) hedging method. Copyright Springer Japan 2014

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    File URL: http://hdl.handle.net/10.1007/s10690-014-9179-6
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    Article provided by Springer in its journal Asia-Pacific Financial Markets.

    Volume (Year): 21 (2014)
    Issue (Month): 2 (May)
    Pages: 121-131

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    Handle: RePEc:kap:apfinm:v:21:y:2014:i:2:p:121-131
    Contact details of provider: Web page: http://springerlink.metapress.com/link.asp?id=102851

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