Hedging Effectiveness of Hong Kong Stock Index Futures Contracts

Xinfan Men, Xinyan Men


This paper investigates the hedging performance of both the HSIF and HHIF contracts using daily data for the period January 2004-June 2005. The hedged portfolios consist of market indices and unit funds. The dynamic OLS-modeled strategies and EWMA-modeled hedging strategies for both 63-day and 126-day estimation windows are compared. The results show that (1) compared to the HSIF contract, the HHIF contract is an important additional hedging instrument; (2) the EWMA model is slightly superior to the dynamic OLS model generally; (3) the cross-hedging effectiveness for actual spot portfolios to be hedged appears to be much lower than that for market indices.

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DOI: https://doi.org/10.5539/ijbm.v3n8p98

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