Hedging Effectiveness of the Athens Stock Exchange Futures Index Contracts

The European Journal of Finance, April 2008, Vol. 14, No 3, pp 243-270

Posted: 12 Feb 2014

See all articles by Ilias Visvikis

Ilias Visvikis

Independent

Manolis G. Kavussanos

Athens University of Economics and Business - Department of Accounting and Finance

Date Written: April 1, 2008

Abstract

This paper examines the hedging effectiveness of the FTSE/ATHEX-20 and FTSE/ATHEX Mid-40 stock index futures contracts in the relatively new and fairly unresearched futures market of Greece. Both in-sample and out-of-sample hedging performances using weekly and daily data are examined, considering both constant and time-varying hedge ratios. Results indicate that time-varying hedging strategies provide incremental risk-reduction benefits in-sample, but under-perform simple constant hedging strategies out-of-sample. Moreover, futures contracts serve effectively their risk management role and compare favourably with results in other international stock index futures markets. Estimation of investor utility functions and corresponding optimal utility maximising hedge ratios yields similar results, in terms of model selection. For the FTSE/ATHEX Mid-40 contracts we identify the existence of speculative components, which lead to utility-maximising hedge ratios, that are different to the minimum variance hedge ratio solutions.

Keywords: hedging effectiveness; futures markets; constant and time-varying hedge ratios; utility

Suggested Citation

Visvikis, Ilias and Kavussanos, Manolis G., Hedging Effectiveness of the Athens Stock Exchange Futures Index Contracts (April 1, 2008). The European Journal of Finance, April 2008, Vol. 14, No 3, pp 243-270, Available at SSRN: https://ssrn.com/abstract=1435344

Ilias Visvikis

Independent ( email )

Manolis G. Kavussanos (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission St
TK 104 34 Athens
Greece
0030 210 8203167 (Phone)
0030 210 8228816 (Fax)

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