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The Superiority of Time-Varying Hedge Ratios in Turkish Futures

  • Onur Olgun

    (Department of International Trade and Finance, Izmir University of Economics)

  • Ý. Hakan Yetkiner

    ()

    (Department of Economics, Izmir University of Economics)

This 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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File URL: http://eco.ieu.edu.tr/wp-content/wp0907.pdf
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Paper provided by Izmir University of Economics in its series Working Papers with number 0907.

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Length: 15 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:izm:wpaper:0907
Contact details of provider: Fax: (90) 232 279 2626
Web page: http://eco.ieu.edu.tr

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