Hedging effectiveness of crude palm oil futures market in Malaysia
This paper investigated the hedging effectiveness of crude palm oil futures market in Malaysia from January 2009 to June 2011 which traded under Bursa Malaysia Derivatives Berhad. Ordinary Least Squared (OLS) method was used to compute Minimum-Variance hedging ratio (MVHR), R-squared and hedging eff...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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IDOSI Publications
2012
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| Online Access: | http://psasir.upm.edu.my/id/eprint/44212/ http://psasir.upm.edu.my/id/eprint/44212/1/Hedging%20effectiveness%20of%20crude%20palm%20oil%20futures%20market%20in%20Malaysia.pdf |
| _version_ | 1848850416900505600 |
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| author | Ong, Tze San Tan, Wei Fong Teh, Boon Heng |
| author_facet | Ong, Tze San Tan, Wei Fong Teh, Boon Heng |
| author_sort | Ong, Tze San |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper investigated the hedging effectiveness of crude palm oil futures market in Malaysia from January 2009 to June 2011 which traded under Bursa Malaysia Derivatives Berhad. Ordinary Least Squared (OLS) method was used to compute Minimum-Variance hedging ratio (MVHR), R-squared and hedging effectiveness by using daily data from settlement price of crude palm oil futures contracts and spot price of crude palm oil. The empirical results indicate that the highest hedging ratio has been observed in the February 2009 FCPO contract, 66.7660%. Meanwhile, the lowest hedging ratio occurs in June 2010 contract which is 35.7131%. In overall, Malaysia FCPO market only provides a low level of hedging effectiveness (19% - 53%) due to less volatility of CPO spot price. As a conclusion, hedging effectiveness of crude palm oil futures market in Malaysia shows a low level of hedging effectiveness. This result indicates that the spot price of crude palm oil in Malaysia is relatively stable and consistent over the period of 2009 to 2011. The outcome of this research intends to provide hedging information of the Malaysia FCPO futures market in order to cover risk exposure by holding FCPO in BMD. |
| first_indexed | 2025-11-15T10:05:57Z |
| format | Article |
| id | upm-44212 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T10:05:57Z |
| publishDate | 2012 |
| publisher | IDOSI Publications |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-442122020-07-09T07:21:20Z http://psasir.upm.edu.my/id/eprint/44212/ Hedging effectiveness of crude palm oil futures market in Malaysia Ong, Tze San Tan, Wei Fong Teh, Boon Heng This paper investigated the hedging effectiveness of crude palm oil futures market in Malaysia from January 2009 to June 2011 which traded under Bursa Malaysia Derivatives Berhad. Ordinary Least Squared (OLS) method was used to compute Minimum-Variance hedging ratio (MVHR), R-squared and hedging effectiveness by using daily data from settlement price of crude palm oil futures contracts and spot price of crude palm oil. The empirical results indicate that the highest hedging ratio has been observed in the February 2009 FCPO contract, 66.7660%. Meanwhile, the lowest hedging ratio occurs in June 2010 contract which is 35.7131%. In overall, Malaysia FCPO market only provides a low level of hedging effectiveness (19% - 53%) due to less volatility of CPO spot price. As a conclusion, hedging effectiveness of crude palm oil futures market in Malaysia shows a low level of hedging effectiveness. This result indicates that the spot price of crude palm oil in Malaysia is relatively stable and consistent over the period of 2009 to 2011. The outcome of this research intends to provide hedging information of the Malaysia FCPO futures market in order to cover risk exposure by holding FCPO in BMD. IDOSI Publications 2012 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/44212/1/Hedging%20effectiveness%20of%20crude%20palm%20oil%20futures%20market%20in%20Malaysia.pdf Ong, Tze San and Tan, Wei Fong and Teh, Boon Heng (2012) Hedging effectiveness of crude palm oil futures market in Malaysia. World Applied Sciences Journal, 19 (4). pp. 556-565. ISSN 1818-4952; ESSN: 1991-6426 https://www.idosi.org/wasj/wasj19(4)2012.htm 10.5829/idosi.wasj.2012.19.04.1447 |
| spellingShingle | Ong, Tze San Tan, Wei Fong Teh, Boon Heng Hedging effectiveness of crude palm oil futures market in Malaysia |
| title | Hedging effectiveness of crude palm oil futures market in Malaysia |
| title_full | Hedging effectiveness of crude palm oil futures market in Malaysia |
| title_fullStr | Hedging effectiveness of crude palm oil futures market in Malaysia |
| title_full_unstemmed | Hedging effectiveness of crude palm oil futures market in Malaysia |
| title_short | Hedging effectiveness of crude palm oil futures market in Malaysia |
| title_sort | hedging effectiveness of crude palm oil futures market in malaysia |
| url | http://psasir.upm.edu.my/id/eprint/44212/ http://psasir.upm.edu.my/id/eprint/44212/ http://psasir.upm.edu.my/id/eprint/44212/ http://psasir.upm.edu.my/id/eprint/44212/1/Hedging%20effectiveness%20of%20crude%20palm%20oil%20futures%20market%20in%20Malaysia.pdf |