EconPapers    
Economics at your fingertips  
 

Testing for Constant Hedge Ratios in Commodity Markets: A Multivariate Garch Approach

GianCarlo Moschini and Robert Myers ()

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The authors develop a new multivariate GARCH parameterization that is suitable for testing the hypothesis that the optimal futures hedge ratio is constant over time, given that the joint distribution of cash and futures prices is characterized by autoregressive conditional heteroskedasticity. The advantage of the new parameterization is that it allows for a flexible form of time-varying volatility, even under the null of a constant hedge ratio. The model is estimated using weekly corn prices. Statistical tests reject the null hypothesis of a constant hedge ratio and also reject the null that time variation in optimal hedge ratios can be explained solely by deterministic seasonality and time-to-maturity effects.

Date: 2002-12-01
New Economics Papers: this item is included in nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Published in Journal of Empirical Finance, December 2002, vol. 9 no. 5, pp. 589-603

Downloads: (external link)
http://www2.econ.iastate.edu/papers/paper_1945.pdf (application/pdf)

Related works:
Journal Article: Testing for constant hedge ratios in commodity markets: a multivariate GARCH approach (2002) Downloads
Working Paper: Testing for constant hedge ratios in commodity markets: a multivariate GARCH approach (2002) Downloads
Working Paper: Testing for Constant Hedge Ratios in Commodity Markets: A Multivariate GARCH Approach (2001) Downloads
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:isu:genres:1945

Access Statistics for this paper

More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().

 
Page updated 2025-03-31
Handle: RePEc:isu:genres:1945