Testing for Constant Hedge Ratios in Futures Markets:A Multivariate GARCH Approach

• Main Authors: Yen-chun Lin, 林妍君
• Other Authors: Jing-yi Lai
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/46900172873032679154

碩士 === 南華大學 === 經濟學研究所 === 94 === 　　Allowing for a more flexible BEKK form of time-varying volatility and with the day-of-the-week effect embedded in the variance-covariance matrix, the study follows a bivariate GARCH parameterization from Moschini and Myers (2002) to test the hypotheses that the optimal futures hedge ratios of MSCI Taiwan Index futures and TAIFEX Stock Index futures are constant over time. The time period covered is from September 1, 1998 through December 30, 2005, including 1867 daily observations over a span of 2921 calendar days. The empirical results show that the null hypothesis of a constant hedge ratio is statistically significantly rejected and the time-varying optimal hedge ratios cannot be explained solely by the day-of-the-week effect. It is also found that over 80% of the variance of the unhedged portfolios returns can be reduced by the hedging strategies suggested in the study for both MSCI Taiwan Index futures and TAIFEX Stock Index futures.