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Estimation bias of futures hedging performance: A note

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  • Donald Lien

Abstract

The conventional approach applies an estimated optimal hedge ratio to evaluate and compare hedging performance. This note shows that the approach produces a biased result. Moreover, it tends to underestimate the true hedging performance. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:835–841, 2006

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  • Donald Lien, 2006. "Estimation bias of futures hedging performance: A note," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 26(8), pages 835-841, August.
    • Handle: RePEc:wly:jfutmk:v:26:y:2006:i:8:p:835-841
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    Cited by:

    1. Jules Sadefo Kamdem & Zoulkiflou Moumouni, 2020. "Comparison of Some Static Hedging Models of Agricultural Commodities Price Uncertainty," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(3), pages 631-655, September.
    2. Zoulkiflou Moumouni & Jules Sadefo-Kamdem, 2019. "New models of commodity risk hedging according to the behavior of economic decision-makers or Rollover Strategies," Working Papers hal-02417459, HAL.
    3. Wang Haoyu & Junpeng Di & Qing Han, 2023. "Adaptive hedging horizon and hedging performance estimation," Papers 2302.00251, arXiv.org.

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