NDLI: The Hedging Effectiveness of Malaysian Crude Palm Oil Futures: An Application of the Extended Mean-Gini Model

Content Provider	Scientific Research Publishing (SCIRP)
Author	Tang, Kin-Boon Tarn, Ju-Yau
Abstract	This paper aims to demonstrate the superiority of Extended Mean-Gini (EMG) framework which is consistent with the second-order of stochastic dominance theory. The study provides a comprehensive analysis of investors’ distinct risk averse behavior towards optimal futures hedging strategy. The empirical distribution function method and the more efficient kernel estimation method are employed in the estimation of EMG hedge ratios. Furthermore, the moving data window procedure is used to examine the stability of the dynamic hedge ratios. The research is conducted on Malaysian Crude Palm Oil and CPO Futures markets for the period of 16th March 1995 to 28th June 2011. The empirical results show that the EMG approach is apparently more appropriate than the MV approach where EMG framework incorporates the risk aversion factor. The study also shows the instability of dynamic hedge ratios across time horizons hence not favorable to investors who adopt the “buy and hold” strategy.
Starting Page	2520
Ending Page	2549
File Format	HTM / HTML PDF
ISSN	21622078
DOI	10.4236/tel.2018.811162
Issue Number	11
Journal	Theoretical Economics Letters
Volume Number	08
e-ISSN	21622086
Language	English
Publisher Date	2018-07-20
Access Restriction	Open
Subject Keyword	Hedging Effectiveness Crude Palm Oil Futures Mean-Gini Approach Financial Risk Management Business & Economics
Content Type	Text
Resource Type	Article

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The Hedging Effectiveness of Malaysian Crude Palm Oil Futures: An Application of the Extended Mean-Gini Model