Coakley, J and Dollery, J and Kellard, NM (2008) The role of long memory in hedging effectiveness. Computational Statistics & Data Analysis, 52 (6). pp. 3075-3082. DOI https://doi.org/10.1016/j.csda.2007.10.019
Coakley, J and Dollery, J and Kellard, NM (2008) The role of long memory in hedging effectiveness. Computational Statistics & Data Analysis, 52 (6). pp. 3075-3082. DOI https://doi.org/10.1016/j.csda.2007.10.019
Coakley, J and Dollery, J and Kellard, NM (2008) The role of long memory in hedging effectiveness. Computational Statistics & Data Analysis, 52 (6). pp. 3075-3082. DOI https://doi.org/10.1016/j.csda.2007.10.019
Abstract
A joint fractionally integrated, error-correction and multivariate GARCH(FIEC-BEKK) approach is applied to investigate hedging effectiveness using daily data 1995?2005. The findings reveal the proxied error-correction term has a long memory component that theoretically should affect hedging effectiveness. When the FIEC model empirical conditions are satisfied, the FIEC-BEKK hedging strategy outperforms the OLS benchmark out of sample in terms of both variance reduction and hedger utility. A bootstrap exercise indicates that the variance reduction is statistically significant.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | Fractional cointegration; FIEC-BEKK; Commodities; Optimal hedge ratio |
| Subjects: | H Social Sciences > HG Finance |
| Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
| SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
| Depositing User: | Unnamed user with email elements@essex.ac.uk |
| Date Deposited: | 15 Nov 2011 10:18 |
| Last Modified: | 24 Oct 2024 15:47 |
| URI: | http://repository.essex.ac.uk/id/eprint/1504 |