Re-evaluating hedging performance

John Cotter and Jim Hanly

Centre for Financial Markets Working Papers from Research Repository, University College Dublin

Abstract: Mixed results have been documented for the performance of hedging strategies using futures. This paper reinvestigates this issue using an extensive set of performance evaluation metrics across seven international markets. We compare the hedging performance of short and long hedgers using traditional variance based approaches together with modern risk management techniques including Value at Risk, Conditional Value at Risk and approaches based on Downside Risk. Our findings indicate that using these metrics to evaluate hedging performance, yields differences in terms of best hedging strategy as compared with the traditional variance measure. We also find significant differences in performance between short and long hedgers. These results are observed both in-sample and out-of-sample.

Keywords: Hedging performance; Lower partial movements; Downside risk; Variance; Semi-variance; Value at risk; Conditional value at risk; Hedging (Finance)--Evaluation; Financial futures--Evaluation; Risk--Econometric models; Analysis of variance (search for similar items in EconPapers)
JEL-codes: G10 G12 G15 (search for similar items in EconPapers)
Date: 2005-07
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10197/1144 First version, 2005 (application/pdf)

Related works:
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:rru:cfmwps:10197/1144

Access Statistics for this paper

More papers in Centre for Financial Markets Working Papers from Research Repository, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Joseph Greene ().