Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract
This study investigates the hedging effectiveness of stock index futures for two Asian markets namely Kuala Lumpur Composite Index futures of Malaysia and Heng Seng stock Index futures of Hong Kong. We employed four different econometric methods such as-conventional ordinary least squares (OLS) mod...
| Main Authors: | , |
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| Format: | Proceeding Paper |
| Language: | English English English |
| Published: |
2014
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| Online Access: | http://irep.iium.edu.my/37652/ http://irep.iium.edu.my/37652/4/scan0003.pdf http://irep.iium.edu.my/37652/1/IRIIE_2014_PDF.pdf http://irep.iium.edu.my/37652/6/IRIIE-2014_Evidence.pdf |
| _version_ | 1848781449829810176 |
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| author | Islam, Mohd Aminul Mohd Noar, Nor Zaihan |
| author_facet | Islam, Mohd Aminul Mohd Noar, Nor Zaihan |
| author_sort | Islam, Mohd Aminul |
| building | IIUM Repository |
| collection | Online Access |
| description | This study investigates the hedging effectiveness of stock index futures for two Asian markets namely Kuala Lumpur Composite Index futures of Malaysia and
Heng Seng stock Index futures of Hong Kong. We employed four different econometric methods such as-conventional ordinary least squares (OLS) model,
vector autoregression (VAR) model, error correction model (ECM) and generalized autoregressive conditional heteroskedasticity (GARCH) models to estimate
optimal hedge ratio and its hedging effectiveness. We found that ECM model provides better results with respect to risk reduction. In other words, in terms of
hedging effectiveness, ECM model exhibits better performance and Hong Kong market appears to provide better hedging performance to market participants
compared to Malaysian futures market. |
| first_indexed | 2025-11-14T15:49:45Z |
| format | Proceeding Paper |
| id | iium-37652 |
| institution | International Islamic University Malaysia |
| institution_category | Local University |
| language | English English English |
| last_indexed | 2025-11-14T15:49:45Z |
| publishDate | 2014 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | iium-376522017-06-15T03:52:27Z http://irep.iium.edu.my/37652/ Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract Islam, Mohd Aminul Mohd Noar, Nor Zaihan HG4501 Stocks, investment, speculation This study investigates the hedging effectiveness of stock index futures for two Asian markets namely Kuala Lumpur Composite Index futures of Malaysia and Heng Seng stock Index futures of Hong Kong. We employed four different econometric methods such as-conventional ordinary least squares (OLS) model, vector autoregression (VAR) model, error correction model (ECM) and generalized autoregressive conditional heteroskedasticity (GARCH) models to estimate optimal hedge ratio and its hedging effectiveness. We found that ECM model provides better results with respect to risk reduction. In other words, in terms of hedging effectiveness, ECM model exhibits better performance and Hong Kong market appears to provide better hedging performance to market participants compared to Malaysian futures market. 2014 Proceeding Paper NonPeerReviewed application/pdf en http://irep.iium.edu.my/37652/4/scan0003.pdf application/pdf en http://irep.iium.edu.my/37652/1/IRIIE_2014_PDF.pdf application/pdf en http://irep.iium.edu.my/37652/6/IRIIE-2014_Evidence.pdf Islam, Mohd Aminul and Mohd Noar, Nor Zaihan (2014) Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract. In: IIUM Research, Invention and Innovation Exhibition 2014, 11-13 June, 2014, Gombak, Kuala Lumpur. (Unpublished) |
| spellingShingle | HG4501 Stocks, investment, speculation Islam, Mohd Aminul Mohd Noar, Nor Zaihan Estimating Hedge Ratio and The Hedging Effectiveness of Stock Index Futures Contract |
| title | Estimating Hedge Ratio and The Hedging
Effectiveness of Stock Index Futures Contract |
| title_full | Estimating Hedge Ratio and The Hedging
Effectiveness of Stock Index Futures Contract |
| title_fullStr | Estimating Hedge Ratio and The Hedging
Effectiveness of Stock Index Futures Contract |
| title_full_unstemmed | Estimating Hedge Ratio and The Hedging
Effectiveness of Stock Index Futures Contract |
| title_short | Estimating Hedge Ratio and The Hedging
Effectiveness of Stock Index Futures Contract |
| title_sort | estimating hedge ratio and the hedging
effectiveness of stock index futures contract |
| topic | HG4501 Stocks, investment, speculation |
| url | http://irep.iium.edu.my/37652/ http://irep.iium.edu.my/37652/4/scan0003.pdf http://irep.iium.edu.my/37652/1/IRIIE_2014_PDF.pdf http://irep.iium.edu.my/37652/6/IRIIE-2014_Evidence.pdf |