The instability of commodity prices and the hypothesis that speculative behaviour was one of its causes has brought renewed interest in futures markets. In this paper, the hedging effectiveness of European and US wheat futures markets were studied to test whether they were affected by the high price instability after 2007. In particular, the focus of the paper is to test of whether the increasing presence of financialisation of commodity trading in futures markets mentioned in the literature has made them divorced from the physical markets. A multivariate GARCH model was applied to compute optimal hedging ratios. Important evidence was found of a slight improvement, after 2007, in the effectiveness of hedging with the European futures.

Hedging effectiveness of European wheat futures markets: An application of multivariate GARCH models / Zuppiroli, Marco; Revoredo Giha, Cesar. - In: INTERNATIONAL JOURNAL OF APPLIED MANAGEMENT SCIENCE. - ISSN 1755-8913. - 8:2(2016), pp. 132-148. [10.1504/IJAMS.2016.077006]

Hedging effectiveness of European wheat futures markets: An application of multivariate GARCH models

ZUPPIROLI, Marco;
2016-01-01

Abstract

The instability of commodity prices and the hypothesis that speculative behaviour was one of its causes has brought renewed interest in futures markets. In this paper, the hedging effectiveness of European and US wheat futures markets were studied to test whether they were affected by the high price instability after 2007. In particular, the focus of the paper is to test of whether the increasing presence of financialisation of commodity trading in futures markets mentioned in the literature has made them divorced from the physical markets. A multivariate GARCH model was applied to compute optimal hedging ratios. Important evidence was found of a slight improvement, after 2007, in the effectiveness of hedging with the European futures.
2016
Hedging effectiveness of European wheat futures markets: An application of multivariate GARCH models / Zuppiroli, Marco; Revoredo Giha, Cesar. - In: INTERNATIONAL JOURNAL OF APPLIED MANAGEMENT SCIENCE. - ISSN 1755-8913. - 8:2(2016), pp. 132-148. [10.1504/IJAMS.2016.077006]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11381/2813282
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