Optimal hedge ration with moving least squares - an empirical study using Indian single stock futures data

Bhattacharya, Sukanto, Singh, Harminder and Alas, Renato M. 2011, Optimal hedge ration with moving least squares - an empirical study using Indian single stock futures data, International research journal of finance and economics, no. 79, pp. 98-111.

Attached Files
Name Description MIMEType Size Downloads

Title Optimal hedge ration with moving least squares - an empirical study using Indian single stock futures data
Author(s) Bhattacharya, SukantoORCID iD for Bhattacharya, Sukanto orcid.org/0000-0001-6587-2879
Singh, HarminderORCID iD for Singh, Harminder orcid.org/0000-0003-2249-2387
Alas, Renato M.
Journal name International research journal of finance and economics
Issue number 79
Start page 98
End page 111
Total pages 14
Publisher EuroJournals
Place of publication Leicestershire, U. K.
Publication date 2011-12
ISSN 1450-2887
Keyword(s) single stock futures
optimal hedge ratio
moving least squares
Summary The use of commodity, currency and stock index futures to hedge risky exposures in the underlying assets is well documented in financial literature. However single stock futures are a relatively new addition to the family of futures and as such, academic research on its use as a hedging tool is relatively thin. In this study we have explored the efficacy of two different methodological approaches that may be applied when hedging a long position in the underlying stock with a single stock future. We use daily trading data covering years 2002 to 2007 from the Indian market, where single stock futures have been really thriving in terms of volume of trade, to extract the optimal hedge ratios using both static OLS as well as 30-day, 60-day and 90-day moving least squares. The method of moving least squares has been in use by market practitioners for some time primarily as a trend analysis and charting tool. Our results indicate that the moving least squares approach outperforms the static OLS in terms of the hedging efficiency, which has been measured by the root mean square hedging error.
Language eng
Field of Research 150201 Finance
150205 Investment and Risk Management
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2011, EuroJournals Publishing, Inc.
Persistent URL http://hdl.handle.net/10536/DRO/DU:30041774

Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Business School
Connect to link resolver
Unless expressly stated otherwise, the copyright for items in DRO is owned by the author, with all rights reserved.

Version Filter Type
Citation counts: TR Web of Science Citation Count  Cited 0 times in TR Web of Science
Scopus Citation Count Cited 2 times in Scopus
Google Scholar Search Google Scholar
Access Statistics: 455 Abstract Views, 5 File Downloads  -  Detailed Statistics
Created: Fri, 27 Jan 2012, 14:22:14 EST by Katrina Fleming

Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact drosupport@deakin.edu.au.