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The Effects of Nose on Index Hedge Performance
hedging performance, hedge ratio, noise, GARCH
|Issue Date: ||2012-12-11 15:38:28 (UTC+8)|
Estimation and application of hedging ratio in stock index futures are important foundations for stock investors in implementing hedging strategies. Noise in futures and spot markets may affect the estimation and performance of hedge ratios. Thus, this study uses two-day average returns as the proxy variable for removing noise, with the three hedging strategies of NAÏVE model, OLS, model, ECM model and GARCH model to conduct hedge ratio estimation for the raw returns information of the futures and spot markets and for the two-day average movement of noise removal. The samples are empirically verified using TAIFEX Futures, Electronic Sector Index Futures, Finance Sector Index Futures, and Small Cap Index Futures, which are the four futures products with greatest trading volume in the Taiwan Futures Exchange.
Results show that when using the hedge ratio of two-day averages for the four products, every model were higher than the hedge ratios estimated with single-day returns. Therefore, after removing noise, the correlation between futures and spot markets are elevated. Hedging performance in 2007 and 2008 with more stable stock trends, single-day returns without noise removal had better daily dynamic hedge fund performance. However, in 2009 and 2010 with volatile rises and falls in the market prices, for these four products, models other than the NAÏVE method had better performance after noise removal. The performance of the NAÏVE model was not as good as GARCH, OLS, and ECM. Thus, during periods of market correction, when there is lower volatility, traditional comprehensive information should be used for hedging strategy, but when the market is volatile or in a rising or falling trend, noise can indeed interfere with the operations of hedging strategies. In this case, one should use two-day averages to remove noise to conduct hedging strategies.
|Appears in Collections:||[金融與風險管理系(所)] 博碩士論文|
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