 Are Chinese live hog futures useful hedging tools?Huilian Huang and Tao Xiong Applied Economics, 2025, vol. 57, issue 18, 2281-2298 Abstract: China’s newly listed live hog futures provide a standardized risk management tool for the hog market. Our paper provides the first systematic and quantitative evaluation of live hog futures’ hedging ability based on various traditional static and dynamic hedging models and an innovative quantile hedging model. Consistent results confirm that live hog futures are useful hedging tools. Specifically, the in-sample results of multiple traditional models show that the hedging ratios are around 0.4 and hedging effectiveness is 0.13. Out-of-sample hedging effectiveness increases significantly to 0.22. Quantile hedging results show more significant risk-management ability in bearish and average futures markets. We further compare live hog futures’ hedging effectiveness and market performance to other commodities. The comparison shows that the live hog futures market has modest hedging effectiveness and underperforms in liquidity, volatility, and basis. Following the empirical results, it is recommended to encourage hedging transactions, simplify trading processes, and enable night trading to enhance liquidity, lower volatility, and eventually improve hedging ability. Date: 2025 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:57:y:2025:i:18:p:2281-2298 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2024.2323023 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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