The role of long memory in hedging effectiveness
نویسندگان
چکیده
A joint fractionally integrated, error-correction andmultivariateGARCH (FIEC-BEKK) approach is applied to investigate hedging effectiveness using daily data 1995–2005. The findings reveal the proxied error-correction term has a long memory component that theoretically should affect hedging effectiveness.When the FIECmodel empirical conditions are satisfied, the FIEC-BEKK hedging strategy outperforms the OLS benchmark out of sample in terms of both variance reduction and hedger utility. A bootstrap exercise indicates that the variance reduction is statistically significant. © 2007 Elsevier B.V. All rights reserved.
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ورودعنوان ژورنال:
- Computational Statistics & Data Analysis
دوره 52 شماره
صفحات -
تاریخ انتشار 2008