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A further note on the optimality of the OLS hedge strategy

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  • Donald Lien

Abstract

This note considers the hedging effectiveness of a dynamic hedge strategy as compared to the conventional OLS strategy. The conditions for the superiority of the OLS strategy are identified. It is argued that these conditions are frequently satisfied and therefore one expects to find the dominance of the OLS strategy over any dynamic strategy in the empirical work. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:308–311, 2008

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  • Donald Lien, 2008. "A further note on the optimality of the OLS hedge strategy," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 28(3), pages 308-311, March.
    • Handle: RePEc:wly:jfutmk:v:28:y:2008:i:3:p:308-311
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    Cited by:

    1. Peter S. Sephton, 2009. "Fractional integration in agricultural futures price volatilities revisited," Agricultural Economics, International Association of Agricultural Economists, vol. 40(1), pages 103-111, January.
    2. Philip, Dennis & Shi, Yukun, 2016. "Optimal hedging in carbon emission markets using Markov regime switching models," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 1-15.
    3. Gu, Yimiao & Chen, Zhenxi & Lien, Donald & Luo, Meifeng, 2020. "Quantile hedge ratio for forward freight market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 138(C).
    4. Bloznelis, Daumantas, 2017. "Hedging under square loss," MPRA Paper 83442, University Library of Munich, Germany.

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