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HEDGING EFFECTIVENESS of CROSS-LISTED NIFTY INDEX FUTURES
Published in World Scientific Publishing
2019
Volume: 19
   
Issue: 2
Abstract

This paper investigates the hedging effectiveness of cross-listed Nifty Index futures and compares the performance of constant and dynamic optimal hedging strategies. We use daily data of Nifty index traded on the National Stock Exchange (NSE), India and cross-listed Nifty futures traded on the Singapore Stock Exchange (SGX) for a period of six years from July 15, 2010 to July 15, 2016. Various competing forms of Multivariate Generalised Autoregressive Conditional Heteroscedasticity (MGARCH) models, such as Constant Conditional Correlation (CCC) and Dynamic Conditional Correlation (DCC), have been employed to capture the time-varying volatility. The results clearly depict that dynamic hedge ratios outperform traditional constant hedge ratios with the DCC–GARCH model being the most efficient with maximum variance reduction from the unhedged portfolio.

About the journal
JournalGlobal Business Review
PublisherWorld Scientific Publishing
ISSN09721509
Open AccessNo
Concepts (2)
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    General economics
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    Econometrics and finance