Re-evaluating hedging performance

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Title: Re-evaluating hedging performance
Authors: Cotter, John
Hanly, Jim
Permanent link: http://hdl.handle.net/10197/1144
Date: 24-Jul-2005
Abstract: Mixed results have been documented for the performance of hedging strategies using futures. This paper reinvestigates this issue using an extensive set of performance evaluation metrics across seven international markets. We compare the hedging performance of short and long hedgers using traditional variance based approaches together with modern risk management techniques including Value at Risk, Conditional Value at Risk and approaches based on Downside Risk. Our findings indicate that using these metrics to evaluate hedging performance, yields differences in terms of best hedging strategy as compared with the traditional variance measure. We also find significant differences in performance between short and long hedgers. These results are observed both in-sample and out-of-sample.
Funding Details: University College Dublin. Faculty of Commerce
Type of material: Working Paper
Publisher: University College Dublin. School of Business. Centre for Financial Markets
Copyright (published version): Centre for Financial Markets, 2005
Keywords: Hedging performance;Lower partial movements;Downside risk;Variance;Semi-variance;Value at risk;Conditional value at risk
Subject LCSH: Hedging (Finance)--Evaluation
Financial futures--Evaluation
Risk--Econometric models
Analysis of variance
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Centre for Financial Markets Working Papers

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