An empirical analysis of multi-period hedges: Applications to commercial and investment assets

Jimmy E. Hilliard, Pinghsun Huang

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

This study measures the performance of stacked hedge techniques with applications to investment assets and to commercial commodities. The naive stacked hedge is evaluated along with three other versions of the stacked hedge, including those which use exponential and minimum variance ratios. Three commercial commodities (heating oil, light crude oil, and unleaded gasoline) and three investment assets (British Pounds, Deutsche Marks, and Swiss Francs) are examined. The evidence suggests that stacked hedges perform better with investment assets than with commercial commodities. Specifically, deviations from the cost-of-carry model result in nontrivial hedge errors in the stacked hedge. Exponential and minimum variance hedge ratios were found to marginally improve the hedging performance of the stack.

Original languageEnglish
Pages (from-to)587-606
Number of pages20
JournalJournal of Futures Markets
Volume25
Issue number6
DOIs
Publication statusPublished - 2005 Jun 1

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance
  • Economics and Econometrics

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