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| Manfredo, Mark R.; Sanders, Dwight R.. |
| An empirical methodology is developed for statistically testing the hedging effectiveness among competing futures contracts. The presented methodology is based on the encompassing principle, widely used in the forecasting literature, and applied here to minimum variance hedging regressions. Intuitively, the test is based on an alternative futures contract's ability to reduce residual basis risk by offering either diversification or a smaller absolute level of basis risk than a preferred futures contract. The methodology is also easily extended to cases involving multiple hedging instruments and general hedge ratio models. The methodology is demonstrated by evaluating the hedging effectiveness of Chicago Board of Trade's (CBOT) corn futures versus the... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Encompassing; Hedging effectiveness; Corn futures; Agribusiness. |
| Ano: 2003 |
URL: http://purl.umn.edu/22247 |
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| Mattos, Fabio; Garcia, Philip; Leuthold, Raymond M.; Hahn, Tony. |
| The purpose of this paper is to investigate the feasibility of a new futures contract for hedging wholesale transactions in the beef industry based on the USDA boxed beef cutout index (BBCO). The results suggest the live cattle futures contract is not an adequate tool to manage the price risk of wholesale meat transactions in the beef industry. However, a futures contract based on the BBCO index might provide considerably more opportunities for the hedging of wholesale meat cut prices. A pattern of improved hedging effectiveness at more distant horizons also appears to emerge for the individual cuts of meat using the conditional hedge procedures. These results may be of particular interest to members of the meat industry with longer planning horizons,... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Hedge ratio; Hedging effectiveness; Boxed-beef cutout; Wholesale beef prices; Marketing. |
| Ano: 2003 |
URL: http://purl.umn.edu/18986 |
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| Dahlgran, Roger A.. |
| Hedge ratio estimation studies avoid estimating hedge ratios for imminently maturing futures contracts because of the maturity effect whereby futures price volatility increases as price uncertainty is resolved at contract expiration. This study first points out that a futures-price volatility increase is neither necessary nor sufficient for reduced hedging effectiveness because hedging effectiveness depends on the cash-futures price correlation. To analyze the hedging performance of imminently maturing futures contracts risk is defined as the conditional variance of profit outcomes. The conditional mean is modeled as Brownian motion. This model was fit to cash and futures price data for corn, cotton, feeder cattle, soybeans, soybean oil, and soybean... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Maturity effect; Hedging effectiveness; Risk management; Marketing. |
| Ano: 2003 |
URL: http://purl.umn.edu/18982 |
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| Sanders, Dwight R.; Manfredo, Mark R.. |
| An empirical methodology is developed for statistically testing the hedging effectiveness among competing futures contracts. The presented methodology is based on the encompassing principle, widely used in the forecasting literature, and applied here to minimum variance hedging regressions. Intuitively, the test is based on an alternative futures contract's ability to reduce residual basis risk by offering either diversification or a smaller absolute level of basis risk than a preferred futures contract. The methodology is easily extended to cases involving multiple hedging instruments and general hedge ratio models. Empirical applications suggest that the encompassing methodology can provide information beyond traditional approaches of comparing hedging... |
| Tipo: Journal Article |
Palavras-chave: Cross-hedging; Encompassing; Hedging effectiveness; Research Methods/ Statistical Methods. |
| Ano: 2004 |
URL: http://purl.umn.edu/31136 |
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