National Tsing Hua University Institutional Repository:Hedging with Foreign-Listed Single Stock Futures
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    NTHUR > College of Technology Management  > Department of Quantitative Finance > QF Journal / Magazine Articles >  Hedging with Foreign-Listed Single Stock Futures

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    Title: Hedging with Foreign-Listed Single Stock Futures
    Authors: Mao-wei Hung;Cheng-few Lee;Leh-chyan So
    Teacher: 索樂晴
    Date: 2005
    Publisher: greenwich connecticut
    Relation: Advances in Quantitative Analysis of Finance and Accounting,greenwich connecticut,vol. 2,2005
    Keywords: Hedging
    hedge ratios
    single stock futures
    Abstract: The objective of this paper is to estimate the hedge ratios of foreign-listed single stock futures (SSFs) and to compare the performance of risk reduction of different methods. The OLS method and a bivariate GJR-GARCH model are employed to estimate constant optimal hedge ratios and the dynamic hedging ratios, respectively. Data of the SSFs listed on the London International Financial Future and Options Exchange (LIFFE) are used in this research. We find that the data series have high estimated constant optimal hedge ratios and high constant correlation in the bivariate GJR-GARCH model, except for three SSFs with their underlying stocks traded in Italy. Our findings provide evidence that distance is a critical factor when explaining investor's trading behavior. Results also show that in general, of the three methods examined (i.e., naïve hedge, conventional OLS method and dynamic hedging) the dynamic hedging performs the best and that naïve hedge is the worst.
    Appears in Collections:[Department of Quantitative Finance] QF Journal / Magazine Articles

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