## ABSTRACT This paper examines the importance of forecasting higher moments for optimal hedge ratio estimation. To this end, autoregressive conditional density (ARCD) models are employed which allow for time variation in variance, skewness and kurtosis. The performance of ARCD models is evaluated
Nonconstant optimal hedge ratio estimation and nested hypotheses tests
β Scribed by Kevin P. McNew; Paul L. Fackler
- Publisher
- John Wiley and Sons
- Year
- 1994
- Tongue
- English
- Weight
- 821 KB
- Volume
- 14
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
π SIMILAR VOLUMES
## Abstract When using derivative instruments such as futures to hedge a portfolio of risky assets, the primary objective is to estimate the optimal hedge ratio (OHR). When agents have meanβvariance utility and the futures price follows a martingale, the OHR is equivalent to the minimum variance he
n practice, commodity hedgers are faced with a fundamental question: what ratio 'However, despite the differences in the estimated hedge ratios, the returns to the hedge portfolios are not significantly different. This occurs despite the greater variability in the return to the portfolio based on th
## Abstract Suppose that there is an information variable (with error correction variable being a special case) affecting the spot price but not the futures price. The estimated optimal hedge ratio is unbiased but inefficient when this variable is omitted. In addition, the resulting hedging effecti