M-GARCH Hedge Ratios and Hedging Effectiveness in Australian Futures Markets

Yang, Joey

doi:10.2139/ssrn.259968

Cited by 8 publications

(9 citation statements)

References 83 publications

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“…Time varying hedge ratio derived from VAR-MGARCH model provides highest variance reduction as compared to the other methods in both in-sample as well as out-of sample period for all contracts. This result is consistent with the results of Myers (1991), Baillie and Myers (1991), Park and Switzer (1995a,b), Lypny and Powella (1998) Kavussanos and Nomikos (2000), Yang (2001), and Floros and Vougas (2006)…”

Section: Discussionsupporting

confidence: 93%

“…Across all futures contracts, dynamic hedge ratio model, bivariate GARCH, performs better than constant hedge ratio models in variance reduction. Similar results were found in studies of Myers (1991), Baillie and Myers (1991) Park and Switzer (1995) Kavussanos and Nomikos (2000), Yang (2001), and Floros and Vougas (2006). However, hedging strategy suggested by VAR-MGARCH model may requires frequent shift in hedging positions and would result in associated transaction costs.…”

Section: Vecm Estimatessupporting

confidence: 83%

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Hedging Effectiveness of Constant and Time Varying Hedge Ratio in Indian Stock and Commodity Futures Markets

2008

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This paper examines hedging effectiveness of futures contract on a financial asset and commodities in Indian markets. In an emerging market context like India, the growth of capital and commodity futures market would depend on effectiveness of derivatives in managing risk. For managing risk, understanding optimal hedge ratio is critical for devising effective hedging strategy. We estimate dynamic and constant hedge ratio for S&P CNX Nifty index futures, Gold futures and Soybean futures. Various models (OLS, VAR, and VECM) are used to estimate constant hedge ratio. To estimate dynamic hedge ratios, we use VAR-MGARCH. We compare in-sample and out-of-sample performance of these models in reducing portfolio risk. It is found that in most of the cases, VAR-MGARCH model estimates of time varying hedge ratio provide highest variance reduction as compared to hedges based on constant hedge ratio. Our results are consistent with findings

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Section: Discussionsupporting

confidence: 93%

Section: Vecm Estimatessupporting

confidence: 83%

Hedging Effectiveness of Constant and Time Varying Hedge Ratio in Indian Stock and Commodity Futures Markets

2008

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“…After reducing matrices A and B to the diagonal form, we obtain the final form of the model DVECH, which is an extension of GARCH model (1.1) (see Yang, 2001).…”

Section: Methodsmentioning

confidence: 99%

The Study of Interdependence Between Capital and Currency Markets Using Multivariate GARCH Models

Chruściński

2009

DEM

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In the article an attempt was made to investigate the interaction among the various stock exchanges as well as various exchange rates and then to determine the direction of information flow between capital and currency markets. Tools used in this study are Multivariate GARCH models. Presented results developed an earlier study of World Stock Exchange classification. These stock exchanges will be further analysed according to their interaction.

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“…These differences appear to be driven by the greater importance of financial accounting statements in Germany than the US and stricter German corporate policies of control over derivative activities within the firm. Yang (2001) calculated coverage rate for future contracts of derivative markets of Australia using four models and in three time horizon of one day, five day and twenty day, and concluded that error correction model have better performance and efficiency of models also increase with prolongation of time periods. In this paper, efficiency has been measured in two states of insidesample and outside-sample.…”

Section: Literature Reviewmentioning

confidence: 99%

Ranking of Hedging Tools from the Perspective of Tehran Stock Exchange Investors

Semnani

Benesloo

2015

Asian Economic and Financial Review

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M-GARCH Hedge Ratios and Hedging Effectiveness in Australian Futures Markets

Cited by 8 publications

References 83 publications

Hedging Effectiveness of Constant and Time Varying Hedge Ratio in Indian Stock and Commodity Futures Markets

Hedging Effectiveness of Constant and Time Varying Hedge Ratio in Indian Stock and Commodity Futures Markets

The Study of Interdependence Between Capital and Currency Markets Using Multivariate GARCH Models

Ranking of Hedging Tools from the Perspective of Tehran Stock Exchange Investors

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