Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract

Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract

This study investigates the hedging effectiveness of stock index futures for two Asian markets namely Kuala Lumpur Composite Index futures of Malaysia and Heng Seng stock Index futures of Hong Kong. We employed four different econometric methods such as-conventional ordinary least squares (OLS) mod...

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Main Authors: Islam, Mohd Aminul, Mohd Noar, Nor Zaihan
Format: Conference or Workshop Item
Language:English
English
English
Published: 2014
Subjects:
HG4501 Stocks, investment, speculation
Online Access:http://irep.iium.edu.my/37652/
http://irep.iium.edu.my/37652/4/scan0003.pdf
http://irep.iium.edu.my/37652/1/IRIIE_2014_PDF.pdf
http://irep.iium.edu.my/37652/6/IRIIE-2014_Evidence.pdf
id iium-37652
recordtype eprints
spelling iium-376522017-06-15T03:52:27Z http://irep.iium.edu.my/37652/ Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract Islam, Mohd Aminul Mohd Noar, Nor Zaihan HG4501 Stocks, investment, speculation This study investigates the hedging effectiveness of stock index futures for two Asian markets namely Kuala Lumpur Composite Index futures of Malaysia and Heng Seng stock Index futures of Hong Kong. We employed four different econometric methods such as-conventional ordinary least squares (OLS) model, vector autoregression (VAR) model, error correction model (ECM) and generalized autoregressive conditional heteroskedasticity (GARCH) models to estimate optimal hedge ratio and its hedging effectiveness. We found that ECM model provides better results with respect to risk reduction. In other words, in terms of hedging effectiveness, ECM model exhibits better performance and Hong Kong market appears to provide better hedging performance to market participants compared to Malaysian futures market. 2014 Conference or Workshop Item NonPeerReviewed application/pdf en http://irep.iium.edu.my/37652/4/scan0003.pdf application/pdf en http://irep.iium.edu.my/37652/1/IRIIE_2014_PDF.pdf application/pdf en http://irep.iium.edu.my/37652/6/IRIIE-2014_Evidence.pdf Islam, Mohd Aminul and Mohd Noar, Nor Zaihan (2014) Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract. In: IIUM Research, Invention and Innovation Exhibition 2014, 11-13 June, 2014, Gombak, Kuala Lumpur. (Unpublished)
repository_type Digital Repository
institution_category Local University
institution International Islamic University Malaysia
building IIUM Repository
collection Online Access
language English
English
English
topic HG4501 Stocks, investment, speculation
spellingShingle HG4501 Stocks, investment, speculation
Islam, Mohd Aminul
Mohd Noar, Nor Zaihan
Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
description This study investigates the hedging effectiveness of stock index futures for two Asian markets namely Kuala Lumpur Composite Index futures of Malaysia and Heng Seng stock Index futures of Hong Kong. We employed four different econometric methods such as-conventional ordinary least squares (OLS) model, vector autoregression (VAR) model, error correction model (ECM) and generalized autoregressive conditional heteroskedasticity (GARCH) models to estimate optimal hedge ratio and its hedging effectiveness. We found that ECM model provides better results with respect to risk reduction. In other words, in terms of hedging effectiveness, ECM model exhibits better performance and Hong Kong market appears to provide better hedging performance to market participants compared to Malaysian futures market.
format Conference or Workshop Item
author Islam, Mohd Aminul
Mohd Noar, Nor Zaihan
author_facet Islam, Mohd Aminul
Mohd Noar, Nor Zaihan
author_sort Islam, Mohd Aminul
title Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
title_short Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
title_full Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
title_fullStr Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
title_full_unstemmed Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
title_sort estimating hedge ratio and the hedging effectiveness of stock index futures contract
publishDate 2014
url http://irep.iium.edu.my/37652/
http://irep.iium.edu.my/37652/4/scan0003.pdf
http://irep.iium.edu.my/37652/1/IRIIE_2014_PDF.pdf
http://irep.iium.edu.my/37652/6/IRIIE-2014_Evidence.pdf
first_indexed 2023-09-18T20:54:00Z
last_indexed 2023-09-18T20:54:00Z
_version_ 1777410181911543808

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