Effectiveness of minimum-variance hedging

Journal of Portfolio Management

Volumn 33, Issue 2, 2007, Pages 46-59

  Alexander, Carol ^a,b   Barbosa, Andreza ^b  

^a Department of Risk Management ^*  (United Kingdom)

^b UNIVERSITY OF READING   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33947124120     PISSN: 00954918     EISSN: None     Source Type: Journal    
DOI: 10.3905/jpm.2007.674793     Document Type: Review

References (66)

1. Ackert, L. F., and Y. S. Tian. "Arbitrage and Valuation in the Market for Standard & Poor's Depositary Receipts." Financial Management, 29 (2000), pp. 71-88.
2. _. "Efficiency in Index Options Markets and Trading in Stock Baskets." Journal of Banking and Finance, 25 (2001), pp. 1607-1634.
3. Aitken, M., A. Frino, A. Hill, and E. Jarnecic. "The Impact of Electronic Trading on Bid-Ask Spreads: Evidence from Futures Markets in Hong Kong, London, and Sydney." Journal of Futures Markets, 24 (7) (2004), pp. 675-696.
4. Alizadeh, A., and N. Nomikos. "A Markov Regime Switching Approach for Hedging Stock Indexes." Journal of Futures Markets, 24 (7) (2004), pp. 649-674.
5. Baillie, R., and R. Myers. "Bivariate GARCH Estimation of the Optimal Commodity Futures Hedge." Journal of Applied Econometrics, 6(2) (1991), pp. 109-124.
6. Bhattacharya,A.,A. Sekhar, and F. Fabozzi. "Incorporating the Dynamic Link Between Mortgage and Treasury Markets in Pricing and Hedging MBS." The Journal of Fixed Income, Fall 2006, pp. 1-7.
7. Blennerhassett, M., and R. Bowman. "A Change in Market Microstructure: The Switch to Electronic Screen Trading on the New Zealand Stock Exchange." International Financial Markets, Institutions and Money, 8 (1998), pp. 261-276.
8. Brooks, C., O.T. Henry, and G. Persand. "The Effect of Asymmetries on Optimal Hedge Ratios."Journal of Business, (2002), pp. 333-352.
9. Burghardt, G. AnnualVolume Survey. Futures Industry Magazine, 2006. Available from http://www.futuresindustry.org
10. Cecchetti, S. G., R. E. Cumby, and S. Figlewski. "Estimation of Optimal Futures Hedge." Review of Economics and Statistics, 70 (1988), pp. 623-630.
11. Chan,W., and D. Young."Jumping Hedges: An Examination of Movements in Copper Spot and Futures Markets." The Journal of Futures Markets, 26 (2) (2006), pp. 169-188.
12. Chen, S., C. Lee, and Shrestha. "Futures Hedge Ratios: A Review." The Quarterly Review of Economics and Finance, 43 (2003), pp. 433-465.
13. Cheung, C. S., C. Kwan, and Y. Yip. "The Hedging Effectiveness of Options and Futures: A Mean-Gini Approach." Journal of Futures Markets, 10 (1990), pp. 61-74.
14. Chordia,T., R. Roll, and A. Subrahmanyam. "Market Liquidity and Trading Activity." Journal of Finance,56 (2) (2001), pp. 501-530.
15. Choudhry, T. "Short-Run Derivations and Optimal Hedge Ratio: Evidence from Stock Futures "Journal of Multinational Financial Management, 13(2) (2003), pp. 171-192.
16. Chu, Q. C., and W.G. Hsieh. "Pricing Efficiency of the S&P 500 Index Market: Evidence from the Standard & Poor's Depositary Receipts." Journal of Futures Markets, 22 (2002), pp. 877-900.
17. Copeland, L., K. Lam, and S.Jones. "The Index Futures Markets: Is Screen Trading More Efficient?" The Journal of Futures Markets,24 (4) (2004), pp. 337-357.
18. Copeland, L., and Y. Zhu. "Hedging Effectiveness in the Index Futures Market." Working paper, Cardiff Business School, 2006.
19. Dark, J. "Long Term Hedging of the Australian All Ordinaries Index using a Bivariate Error Correction Figarch Model." Business and Economics Working Paper 07, Monash University, 2004.
20. Ederington, L.H."The Hedging Performance of the New Futures Markets." Journal of Finance, 34 (1979), pp. 157-170.
21. Eftekhari, B. "Lower Partial Moment Hedge Ratios." Applied Financial Economics, 8 (1998), pp. 645-652.
22. Engle, R., and C. Granger."Co-integration and Error Correction: Representation, Estimation and Testing." Econometrica, 55 (1987), pp. 251-276.
23. Figlewski, S. "Hedging Performance and Basis Risk in Stock Index Futures." Journal of Finance, 39 (1984), pp. 657-669.
24. Floras, C., and D.Vougas."Hedge Ratios in Greek Stock Index Futures Market." Applied Financial Economics, 14(15) (2004), pp. 1125-1136.
25. Frino, A.,T. Mclnish, and M. Toner.'The Liquidity of Automated Exchanges: New Evidence from German Bund Futures."Journal of International Financial Markets, Institutions and Money, 8 (1998), pp. 225-242.
26. Fung, J.K.W., D. Lien,Y.M.Tse, and Y.K.Tse. "Effects of Electronic Trading on the Hang Seng Index Futures Market." International Review of Economics & Finance 14 (4) (2005), pp. 415-425.
27. Garbade, K. D., and W. L. Silber. "Price Movement and Price Discovery in Futures and Cash Markets." Review of Economics and Statistics, 65 (1983), pp. 289-297.
28. Geppert,J.M."A Statistical Model for the Relationship Between Futures Contract Hedging Effectiveness and Investment Horizon Length." Journal of Futures Markets, 15(7) (1995), pp. 507-536.
29. Ghosh, A. "Cointegration and Error Correction Models: Intertemporal Causality Between Index and Futures Prices." Journal of Futures Markets, 13(2) (1993), pp. 193-198.
30. Gilbert, C., and H. Rijken. "How is Futures Trading Affected by the Move to a Computerized Trading System? Lessons from the LIFFE FTSE 100 Contract." Journal of Business Finance & Accounting, (2006), pp. 1-31.
31. Graham, D., and R. Jennings. "Systematic Risk, Dividend Yield and the Hedging Performance of Stock Index Futures." Journal of Futures Markets, 7(1) (1987), pp. 1-13.
32. Harris, R., and J. Shen."Robust Estimation of the Optimal Hedge Ratio." Journal of Futures Markets, 23(8) (2003), pp. 799-816.
33. Howard, C.T., and L.J. D'Antonio. "A Risk-Return Measure of Hedging Effectiveness." Journal of Financial and Quantitative Analysis, 19 (1984), pp. 101-112.
34. Johnson, L. "The Theory of Hedging and Speculation in Commodity Futures." The Review of Economic Studies, 27(3) (1960), pp. 139-151.
35. Koutmos, G., and A. Pericli. "Hedging GNMA Mortgage-Backed Securities with T-Note Futures: Dynamic Versus Static Hedging." Real Estate Economics, 27 (2) (1999), pp. 335-363.
36. Kroner, K.F., and J. Sultan."Time Varying Distribution and Dynamic Hedging with Foreign Currency Futures." Journal of Financial and Quantitative Analysis, 28 (1993), pp. 535-551.
37. Kurov, A., and D. Lasser. "The Effect of the Introduction of Cubes on the Nasdaq-100 Index Spot-Futures Pricing Relationship." The Journal of Futures Markets,22 (2002),pp. 197-218.
38. Lai,Y.H, C.W. Chen, and R. Gerlach. "Optimal Dynamic Hedging using Copula-Threshold-GARCH Models." Presented at the International Conference on Time Series Econometrics, Finance and Risk (Perth, July 2006).
39. Laws, J., and J. Thompson. "Hedging Effectiveness of Stock Index Futures." European Journal of Operational Research, 163 (2005), pp. 177-191.
40. Lee, H.T. and J.Yoder."A Bivariate Markov Regime Switching GARCH Approach to Estimate Time Varying Minimum Variance Hedge Ratios." Working Paper 05, School of Economic Sciences, Washington State University, 2005.
41. Lence, S.H. "The Economic Values of Minimum-Variance Hedges." American Journal of Agricultural Economic 77(2) (1995), pp. 353-364.
42. Lien, D. "Cointegration and the Optimal Hedge Ratio: The General Case". Quarterly Review of Economics and Finance, 44 (2004), pp. 654-658.
43. ""The Use and Abuse of the Hedging Effectiveness Measure." International Review of Financial Analysis, 14(2) (2005), pp. 277-282.
44. Lien, D., and X. Luo. "Estimating the Extended Mean-Gini Coefficient for Futures Hedging."Journal of Futures Markets, 13 (1993), pp. 665-676.
45. Lien, D., and D. R. Shaffer."Note on Estimating the Minimum Extended Gini Hedge Ratio." Journal of Futures Markets, 19 (1999), pp. 101-113.
46. Lien, D., and Y. K.Tse."Hedging Downside Risk with Futures Contracts." Applied Financial Economics, 10 (2000), pp. 163-170.
47. _."Hedging Time-Varying Downside Risk."Journal of Futures Markets, 18 (1998), pp. 705-722.
48. Lien, D., and Y.Tse. "Some Recent Developments in Futures Hedging."Journal of Economic Surveys, 16 (3) (2002),pp. 357-396.
49. Lien, D.D.,Y.K.Tse, and A.K.C.Tsui."Evaluating the Hedging Performance of the Constant Correlation GARCH Model." Applied Financial Economics, 12(11) (2002), pp. 791-798.
50. Lindahl, M. "MinimumVariance Hedge Ratios for Stock Index Futures: Duration and Expiration Effects."Journal of Futures Markets, 12(1) (1992), pp. 33-53.
51. Massib, M., and B. Phelps. "Electronic Trading, Market Structure and Liquidity." Financial Analysts Journal, (1994), pp. 39-50.
52. Mattos, F.,P. Garcia, and C. Nelson."Relaxing Standard Hedging Assumptions in the Presence of Downside Risk." Forthcoming, Quarterly Review of Economics and Finance, 2006.
53. Merrick, J.J. "Hedging with Mispriced Futures."Journal of Financial and Quantitative Analysis, 23(4) (1988), pp. 451-464.
54. Miffre, J. "Conditional OLS Minimum Variance Hedge Ratios." Journal of Futures Markets, 24(10) (2004), pp. 945-964.
55. Moosa, I. "The Sensitivity of Optimal Hedge Ratio to Model Specification." Finance Letters, 1 (2003), pp. 15-20.
56. Moschini, G., and R. Myers."Testing for Constant Hedge Ratios in Commodity Markets: A Multivariate GARCH Approach." Journal of Empirical Finance, 9 (2002), pp. 589-603.
57. Myers, R., and S.Thompson. "Generalized Optimal Hedge Ratio Estimation." American Journal of Agricultural Economics, 71 (1989), pp. 858-868.
58. Park, T. H., and L.N. Switzer."Time-Varying Distributions and the Optimal Hedge Ratios for Stock Index Futures." Applied Financial Economics, 5 (1995), pp. 131-137.
59. Pirrong, C. "Market Liquidity and Depth on Computerized and Open OutcryTrading Systems:A Comparison of DTB and LIFFE Bund Contracts." Journal of Futures Markets, 16 (1996),pp. 519-544.
60. Poomimars, P.,J. Cadle, and M.Theobald."Futures Hedging Using Dynamic Models of the Variance/Covariance Structure." Journal of Futures Markets, 23 (3) (2003), pp. 241-260.
61. Shyy, G., and J. H. Lee. "Price Transmission and Information Asymmetry in Bund Futures Markets: LIFFE vs. DTB."Journal of Futures Markets, 15 (1995), pp. 87-99.
62. Sutcliffe, C. Stock Index Futures, 3rd ed. Hampshire: Ashgate, 2005.
63. Switzer, L. N., P. L. Varson, and S. Zghidi. "Standard & Poor's Depository Receipts and the Performance of the S&P 500 Index Futures Market." Journal of Futures Markets, 20 (2000),pp. 705-716.
64. Tong, S. "An Examination of Dynamic Hedging." Journal of International Money and Finance, 15 (1996), pp. 19-35.
65. Tse,Y., and T. Zabotina. "Transaction Costs and Market Quality: Open Outcry versus Electronic Trading."Journal of Futures Markets, 21(8) (2001), pp. 713-735.
66. Yang,W.,and D.E.Allen."Multivariate GARCH Hedge Ratios and Hedging Effectiveness in Australian Futures Markets." Accounting and Finance, 45 (2005), pp. 301-321.