On the Stationarity of Futures Hedge Ratios

Stavros Degiannakis, Christos Floros, Enrique Salvador and Dimitrios Vougas

MPRA Paper from University Library of Munich, Germany

Abstract: Stationarity of hedge ratios can be viewed as a first step for portfolio hedging since it represents that the sensitivity of spot and futures returns follow a process whose main characteristics do not depend on time. However, we provide evidence that the hedge ratios of the main European stock indices are better described as a combination of two different mean-reverting stationary processes, which depend on the state of the market. Also, when analysing the dynamics of hedge ratios at intraday level, results display a similar picture suggesting that intraday dynamics of the hedge between spot and futures are driven mainly by market participants with similar perspectives of the investment horizon.

Keywords: Futures; Hedge Ratios; Intra-day Data; Multivariate Volatility Modelling; Regime-Switching; Stationarity. (search for similar items in EconPapers)
JEL-codes: C32 C58 G13 G15 (search for similar items in EconPapers)
Date: 2020-08-01
New Economics Papers: this item is included in nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/102907/1/MPRA_paper_102907.pdf original version (application/pdf)

Related works:
Journal Article: On the stationarity of futures hedge ratios (2022)
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:pra:mprapa:102907

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().