Weather Risk Hedging in the European Markets and International Investment Diversification

Charles C Yang, Linda Shihong Li () and Min-Ming Wen ()
Additional contact information
Charles C Yang: Department of Finance, Florida Atlantic University, Boca Raton, Florida, U.S.A
Linda Shihong Li: NCCI Holdings, Inc., Boca Raton, Florida, U.S.A.
Min-Ming Wen: Department of Finance and Law, California State University, Los Angeles, California, U.S.A.

The Geneva Risk and Insurance Review, 2011, vol. 36, issue 1, 74-94

Abstract: This article analyses weather risk hedging efficiency in three European countries using weather derivatives traded at Chicago Mercantile Exchange (CME) and explores the potential of weather derivatives as a new investment asset to further diversify investors’ portfolios. The results document that the CME European weather contracts are generally effective in hedging the temperature risk in the three European countries. However, for a specific country, weather risk hedging using other countries’ weather indexes is generally not effective. Zero or little correlation among international weather indexes and stock market indexes indicates that weather derivatives should be an efficient investment diversifier. This research provides important insights to both weather risk hedgers and investors.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v36/n1/pdf/grir20104a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v36/n1/full/grir20104a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:36:y:2011:i:1:p:74-94

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().