Multi‐period hedge ratios for a multi‐asset portfolio when accounting for returns co‐movement
Year: 2007
Type: article
Abstract: This study presents a model to select the optimal hedge ratios of a portfolio composed of an arbitrary number of commodities. In particular, returns dependency and heterogeneous investment horizons are accounted for by copulas and wavelets, respectively. A portfolio of London Metal Exchange metals is analyzed for the period July 1993–December 2005, and it is concluded that neglecting cross correlations leads to biased estimates of the optimal hedge ratios and the degree of hedge effectiveness. Furthermore, when compared with a multivariate‐GARCH specification, our methodology yields higher hedge effectiveness for the raw returns and their short‐term components. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:182–207, 2008
Source: Journal of Futures Markets
DOI: 10.1002/fut.20294
Author: Viviana Fernandez
Institutions: Trinity College Dublin, University of Chile
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1555536201