Evidence on Hedging Effectiveness in Indian Derivatives Market

Barik Kumar () and M. Supriya ()

Asia-Pacific Financial Markets, 2014, vol. 21, issue 2, 131 pages

Abstract: The hedging effectiveness for bank futures and CNX nifty are evaluated in this study. The study is based on 9,569 observations of the daily data for these index futures. For evaluation ordinary least square, co-integrated ordinary least square, generalized auto-regressive conditional heteroscedasticity (1, 1), and constant correlation generalized auto-regressive conditional heteroscedasticity (1, 1) hedging methods are estimated and compared. Result shows that constant correlation generalized auto-regressive conditional heteroscedasticity (1, 1) is an efficient hedging method that maximizes investors’ utility function considering transaction costs. Therefore, investors can rely on this constant correlation generalized auto-regressive conditional heteroscedasticity (1, 1) hedging method. Copyright Springer Japan 2014

Keywords: Hedging effectiveness; Constant correlation generalized auto-regressive conditional heteroscedasticity (1; 1)hedging method; Bank futures; CNX nifty; G10; G12; G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10690-014-9179-6

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