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An Econometric Investigation of Hedging Performance of Stock Index Futures in Korea: Dynamic versus Static Hedging

Hasan, Mohammad S, Choudhry, Taufiq, Zhang, Yuanyuan (2020) An Econometric Investigation of Hedging Performance of Stock Index Futures in Korea: Dynamic versus Static Hedging. International Journal of Banking Accounting and Finance, 11 (2). pp. 227-253. ISSN 1755-3830. (doi:10.1504/IJBAAF.2020.106712) (KAR id:69240)

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Official URL:
https://doi.org/10.1504/IJBAAF.2020.106712

Abstract

Employing daily data of stock index and stock index futures, this paper empirically investigates the hedging effectiveness of time-varying hedge ratios of emerging futures markets using South Korea as a case. This paper employs eight variants of GARCH models to estimate the hedge ratios along with the conventional methods, and compares the hedging effectiveness of these estimated hedge ratios across model specifications using both within-sample and out-of-sample forecasting performances. In contrast to recent research findings, hedging performance based on a conventional OLS method outperforms the GARCH class models.

Item Type: Article
DOI/Identification number: 10.1504/IJBAAF.2020.106712
Uncontrolled keywords: Stock index futures; time-varying hedge ratio; GARCH model; hedging effectiveness
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Mohammad Hasan
Date Deposited: 25 Sep 2018 11:17 UTC
Last Modified: 06 Oct 2021 15:42 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/69240 (The current URI for this page, for reference purposes)
Hasan, Mohammad S: https://orcid.org/0000-0002-2453-6868
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