Measuring Hedging Effectiveness of Index Futures Contracts: Do Dynamic Models Outperform Static Models? A Regime-Switching Approach
| Autor: | Enrique Salvador, Vicent Aragó |
|---|---|
| Rok vydání: | 2013 |
| Předmět: |
Economics and Econometrics
Financial economics Autoregressive conditional heteroskedasticity Regime switching General Business Management and Accounting Stock market index Dynamic models Accounting Replicating portfolio Econometrics Economics Hedge ratio Volatility (finance) Futures contract Finance |
| Zdroj: | Journal of Futures Markets. 34:374-398 |
| ISSN: | 0270-7314 |
| DOI: | 10.1002/fut.21598 |
| Popis: | This paper estimates linear and non-linear GARCH models to find optimal hedge ratios with futures contracts for some of the main European stock indexes. By introducing non-linearities through a regime-switching model, we can obtain more efficient hedge ratios and superior hedging performance in both in-sample and out-sample analysis compared with other methodologies (constant hedge ratios and linear GARCH). Moreover, non-linear models also reflect different patterns followed by the dynamic relationship between the volatility of spot and futures returns during low and high volatility periods. |
| Databáze: | OpenAIRE |
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