A bivariate Markov regime switching GARCH approach to estimate time varying minimum variance hedge ratios

Applied Economics

Volumn 39, Issue 10, 2007, Pages 1253-1265

  Lee, Hsiang Tai ^a   Yoder, Jonathan K ^b  

^a NATIONAL CHI NAN UNIVERSITY   (Taiwan)

^b WASHINGTON STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

MARKOV CHAIN; NUMERICAL MODEL;

ZEA MAYS;

EID: 34447312834     PISSN: 00036846     EISSN: 14664283     Source Type: Journal    
DOI: 10.1080/00036840500438970     Document Type: Article

References (40)

1. Alizadeh, A. and Nominos, N. (2004) A Markov regime switching approach for hedging stock indices. The Journal of Futures Markets, 24, pp. 649-674.
2. Aragó, V. and Fernández, A. (2002) Expiration and maturity effect: Empirical evidence from the Spanish spot and futures stock index. Applied Economics, 34, pp. 1617-1626.
3. Baillie, RT and Myer, RJ (1991) Bivariate GARCH estimation of the optimal commodity futures hedge. Journal of Applied Econometrics, 6, pp. 109-124.
4. Bautista, CC (2005) How volatile are East Asian stocks during high volatility periods?. Applied Economics Letters, 12, pp. 319-326.
5. Bera, AK, Garcia, P. and Roh, JS (1997) Estimation of time-varying hedge ratios for corn and soybean: BGARCH and random coefficient approaches. The Indian Journal of Statistics, 59, pp. 346-368.
6. Bollerlev, T. (1986) Generalized autoregressive conditional heteroscedasticity. Journal of Econometric, 31, pp. 307-327.
7. Bollerslev, T. (1990) Modelling the coherence in short-run nominal exchange rates: A multivariate generalized ARCH model. Review of Economics and Statistics, 72, pp. 498-505.
8. Brooks, C., Henry, OT and Persand, G. (2002) The effect of asymmetries on optimal hedge ratios. Journal of Business, 75, pp. 333-352.
9. Byström, HNE (2003) The hedging performance of electricity futures on the nordic power exchange. Applied Economics, 35, pp. 1-11.
10. Cai, J. (1994) A Markov model of switching-regime ARCH. Journal of Business and Economic Statistics, 12, pp. 309-316.
11. Cecchetti, SG, Cumby, RE and Figlewski, S. (1988) Estimation of optimal futures hedge. Review of Economics and Statistics, 70, pp. 623-630.
12. Caporale, GM and Spagnolo, N. (2004) Modelling East Asian exchange rates: A Markov-switching approach. Applied Financial Economics, 14, pp. 233-242.
13. Ederington, LH (1979) The hedging performance of the new futures markets. The Journal of Finance, 34, pp. 157-170.
14. Engle, RF (1982) Autoregressive conditional heteroscedasticity with estimates of the variance of UK inflation. Econometrica, 50, pp. 987-1007.
15. Engle, RF and Kroner, KF (1995) Multivariate simultaneous generalized ARCH. Econometric Theory, 11, pp. 122-150.
16. Figlewki, S. (1984) Hedging performance and basis risk in stock index futures. The Journal of Finance, 39, pp. 657-669.
17. Floros, C. and Vougas, DV (2004) Hedge ratios in Greek stock index futures index market. Applied financial Economics, 14, pp. 1125-1136.
18. Gagnon, L. and Lypny, G. (1995) Hedging short-term interest risk under time-varying distribution. The Journal of Futures Markets, 15, pp. 767-783.
19. Gagnon, L., Lypny, GJ and McCurdy, TH (1998) Hedging foreign currency portfolios. Journal of Empirical Finance, 5, pp. 197-220.
20. Gannon, G. and Au-Yeung, SP (2004) Structural effects and spillovers in HSIF, HIS, and S&P500 volatility
21. Gray, SF (1995) An analysis of conditional regime-switching models, Working Paper, Duke University
22. Gray, SF (1996) Modelling the conditional distribution of interest rates as a regime-switching process. Journal of Financial Economics, 42, p. 27.
23. Hamilton, JD (1989) A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica, 57, pp. 357-384.
24. Hamilton, JD and Susmel, R. (1994) Autoregressive conditional heteroscedasticity and changes in regime. Journal of Econometrics, 64, pp. 307-333.
25. Hwang, S. and Satchell, SE (2005) GARCH model with cross-sectional volatility: GARCHX models. Applied Financial Economics, 15, pp. 203-216.
26. Kash-Haroutounian, M. and Price, S. (2001) Volatility in the transition markets of Central Europe. Applied Financial Economics, 11, pp. 93-105.
27. Kasuya, M. (2005) Regime switching approach to monetary policy effects. Applied Economics, 37, pp. 307-326.
28. Katsimi, M. (2000) Stochastic shifts in the natural rate of unemployment: Evidence from Greece. Applied Economics Letters, 7, pp. 239-242.
29. Kroner, KF and Sultan, J. (1993) Time-varying distribution and dynamic hedging with foreign currency futures. Journal of Financial and Quantitative Analysis, 28, pp. 535-551.
30. Kuo, C. (2005) Taiwan's financial holding companies: An empirical investigation based on Markov regime switching model. Applied Economics, 37, pp. 593-605.
31. Lien, DY, Tse, K. and Tsui, AKC (2002) Evaluating the hedging performance of the constant correlation GARCH model. Applied Financial Economics, 12, pp. 791-798.
32. Myers, RJ (1991) Estimating time-varying optimal hedge ratios on futures markets. The Journal of Futures Markets, 11, pp. 39-53.
33. Park, TH and Switzer, LN (1995) Bivariate GARCH estimation of the optimal hedge ratios for stock index futures: A note. The Journal of Futures Markets, 15, pp. 61-67.
34. Politis, D. and Romano, JP (1994) The stationary bootstrap. Journal of the American Statistical Association, 89, pp. 1303-1313.
35. Sarno, L. and Valente, G. (2000) The cost of carry model and regime shifts in stock index futures markets: An empirical investigation. The journal of Futures Markets, 20, pp. 603-624.
36. Schaller, H. and Van Norden, S. (1997) Regime switching in stock market returns. Applied Financial Economics, 7, pp. 177-191.
37. Soydemir, GA and Petrie, AG (2003) Intraday information transmission between DJIA spot and futures markets. Applied Financial Economics, 13, pp. 817-827.
38. Sullivan, R., Timmermann, A. and White, H. (1999) Data-snooping, technical trading rule performance, and the bootstrap. Journal of Finance, 54, pp. 1647-1692.
39. Tong, WHS (1996) An examination of dynamic hedging. Journal of International Money and Finance, 15, pp. 19-35.
40. White, H. (2000) A reality check for data snooping. Econometrica, 68, pp. 1097-1126.