Abstract
This paper examines the hedging performance with mini gold futures traded on the Korean Exchange (KRX). We use the daily prices of gold and mini gold futures from September 13, 2010 to May 31, 2013. We employ the OLS model and VECM as well as the bivariate GJR-GARCH (1,1) model. Our empirical results maintain that the time varying GJR-GARCH (1,1) model yields better hedging performance than time-invariant OLS or VECM models in the both in-sample and out-of sample periods. We thus recommend that investors consider the asymmetric dynamic hedging model when constructing the minimum-variance hedging portfolio to manage the market risk exposure of gold.
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Notes
\( \updelta \) is estimated \( e_{t - 1} = S_{t - 1} - \delta F_{t - 1} \sim I\left( 0 \right) \) in \( S_{t - 1} = \delta F_{t - 1} e_{t - 1} , S_{t - 1} \sim I\left( 1 \right), F_{t - 1} \sim I\left( 1 \right) \).
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Kim, S., Park, C. & Yun, Y. Hedging with mini gold futures: evidence from Korea. Eurasian Econ Rev 4, 163–176 (2014). https://doi.org/10.1007/s40822-014-0012-3
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DOI: https://doi.org/10.1007/s40822-014-0012-3