%0 Journal Article
%T Effectiveness of a Time-Varying and Constant Hedge Ratio: Evidence from Gold Coin’s Futures Contracts Traded in Iran Mercantile Exchange
%J Journal of Economic Research (Tahghighat- E- Eghtesadi)
%I University of Tehran
%Z 0039-8969
%A Mehrara, Mohsen
%A naebi, fatemeh
%D 2017
%\ 09/23/2017
%V 52
%N 3
%P 711-734
%! Effectiveness of a Time-Varying and Constant Hedge Ratio: Evidence from Gold Coin’s Futures Contracts Traded in Iran Mercantile Exchange
%K Optimal Hedge Ratio
%K Effectiveness of Hedge Ratio
%K Time-Varying and Constant Hedge Ratio
%K Weighted average of futures prices with different maturities
%R 10.22059/jte.2017.63314
%X In emerging markets, the growth of capital and commodity futures market would depend on effectiveness of derivatives in managing risk. For managing risk, understanding optimal hedge ratio is critical for devising effective hedging strategy. The present paper estimates the minimum variance optimal hedge ratio of gold coin's futures contracts in Iran, by using various econometric methods. It is found that by putting futures contract in the portfolio, the risk is significantly reduced. In the comparison of the estimated optimal hedge ratio among various econometric methods, CCC_GARCH ,OLS and VECM have more ability in risk reduction as compared to others. Contrary to expectation, by applying conditional variance-covariance matrix, Garch model is not more efficient compared to other approaches. One reason could be the short history of the futures market in Iran which causes low efficiency in delivering the right information to investors is the market.
JEL Classification: G15, C01, C22, C11
%U https://jte.ut.ac.ir/article_63314_6477896973cdac29b22e65cf8cda4a8e.pdf