Suchergebnisse

'Program trading'and stock index futures and options are often blamed for stock market volatility, and especially so after the Crash. Professor Tyler Cowen, of the University of California at Irvine, claims that these new trading techniques have not added to volatility and that regulation could well increase it.

AbstractIn this paper we extend the traditional price change hedge ratio estimation method by applying the theory of cointegration to hedging with stock index futures contracts for France (CAC 40), the United Kingdom (FTSE 100), Germany (DAX), and Japan (NIKKEI). Previous studies ignore the last period's equilibrium error and short‐run deviations. The findings of this study indicate that the hedge ratios obtained from the error correction method are superior to those obtained from the traditional method as evidenced by the likelihood ratio test and out‐of‐sample forecasts. Using the procedures developed in this paper, hedgers can control the risk of their portfolios more effectively at a lower cost.