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Robust Estimation of beta and the hedging ratio in Stock Index Futures In the Integrated Latin American Market

Juan Carlos Gutierrez Betancur ()

Revista Ecos de Economía, 2017, vol. 21, issue 44, 37-71

Abstract: This paper examines the effect exerted by outliers in the equity betas in the Integrated Latin American Market (MILA), estimated by two different methods: ordinary least squares (OLS) and robust estimation (RMM). To illustrate the empirical relevance of the estimated betas, we evaluate the hedging ratio using stock index futures. The results indicate that the estimates made by the RMM method provide a better fit and increase the efficiency of a hedging strategy when there are outliers in the estimation window of beta.

Keywords: Estimation of beta; robust statistics MM (RMM); ordinary least squares (OLS); hedging ratio with stock MILA market index futures. (search for similar items in EconPapers)
JEL-codes: G12 G17 C14 C18 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:col:000442:015652

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