Short-run deviations and time-varying hedge ratios: evidence from agricultural futures markets
Short-run deviations and time-varying hedge ratios: evidence from agricultural futures markets
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.
hedge ratio, garch, bekk garch, garch-x, bekk garch-x and variance
58-65
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
March 2009
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Choudhry, Taufiq
(2009)
Short-run deviations and time-varying hedge ratios: evidence from agricultural futures markets.
International Review of Financial Analysis, 18 (1-2), .
(doi:10.1016/j.irfa.2008.11.003).
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.
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Published date: March 2009
Keywords:
hedge ratio, garch, bekk garch, garch-x, bekk garch-x and variance
Organisations:
Management
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Local EPrints ID: 64646
URI: http://eprints.soton.ac.uk/id/eprint/64646
ISSN: 1057-5219
PURE UUID: 8adc0eb1-7618-428d-ae3a-dc6a3293703d
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Date deposited: 16 Jan 2009
Last modified: 16 Mar 2024 03:16
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