Short-run deviations and time-varying hedge ratios: evidence from agricultural futures markets


Choudhry, Taufiq (2009) Short-run deviations and time-varying hedge ratios: evidence from agricultural futures markets. International Review of Financial Analysis, 18, (1-2), 58-65. (doi:10.1016/j.irfa.2008.11.003).

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Description/Abstract

This paper investigates the hedging effectiveness of time-varying hedge ratios in the agricultural commodities futures markets using four different versions of the GARCH models. The GARCH models applied are the standard bivariate GARCH, the bivariate BEKK GARCH, the bivariate GARCH-X and the bivariate BEKK GARCH-X. Futures data for corn, coffee, wheat, sugar, soybeans, live cattle and hogs are applied. Comparison of the hedging effectiveness is done for the within sample period (1980–2004), and two out-of-sample periods (2002–2004 and 2003–2004). Results indicate superior performance of the portfolios based on the GARCH-X model estimated hedge ratio during all periods.

Item Type: Article
ISSNs: 1057-5219 (print)
Related URLs:
Keywords: hedge ratio, garch, bekk garch, garch-x, bekk garch-x and variance
Subjects: H Social Sciences > HG Finance
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HA Statistics
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 64646
Date Deposited: 16 Jan 2009
Last Modified: 27 Mar 2014 18:46
URI: http://eprints.soton.ac.uk/id/eprint/64646

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