A note on the superiority of the OLS hed
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Donald Lien
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Article
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2005
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John Wiley and Sons
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English
β 80 KB
π 2 views
Suppose that spot and futures prices are generated from an errorcorrection model. This note demonstrates that, although the OLS model is misspecified, it provides a hedge ratio that usually outperforms the hedge ratio derived from the correct error-correction model. The opposite result is possible o