A comparison of measures of hedging effectiveness: A case study using the Australian all ordinaries share price index futures contract

Brailsford, T, Corrigan, K and Heaney, R 2001, 'A comparison of measures of hedging effectiveness: A case study using the Australian all ordinaries share price index futures contract', Journal of Multinational Financial Management, vol. 11, pp. 465-481.


Document type: Journal Article
Collection: Journal Articles

Title A comparison of measures of hedging effectiveness: A case study using the Australian all ordinaries share price index futures contract
Author(s) Brailsford, T
Corrigan, K
Heaney, R
Year 2001
Journal name Journal of Multinational Financial Management
Volume number 11
Start page 465
End page 481
Total pages 16
Publisher Elsevier
Abstract Hedging is claimed to be of fundamental importance in managing the risk of an investment portfolio. Several techniques to assess the effectiveness of a hedge have been suggested in the literature. While these techniques hold theoretical appeal, there is little empirical evidence as to their usefulness. This paper provides an empirical comparison of three measures of hedge effectiveness in the context of hedging market risk using the Australian All Ordinaries Share Price Index Futures contract. The three measures are portfolio S.D. ranking, the Howard and D'Antonio [Howard, C.T., D'Antonio, L.J., 1987. A risk return measure of hedging effectiveness: a reply. J. Finan. Quant. Anal. 22(3), 377-381.] measure and the Lindahl [Lindahl, M., 1991. Risk-return hedging effectiveness measures for stock index futures. J. Futures Markets 11(4), 399-409.] measure. The results indicate that the selection of the particular measure of hedge effectiveness has an impact on the assessment of hedged portfolios. Further, the paper highlights problems that arise in the application of the Lindahl [Lindahl, M., 1991. Risk-return hedging effectiveness measures for stock index futures, J. Futures Markets 11(4), 399-409.] and Howard and D'Antonio [Howard, C.T., D'Antonio, L.J., 1987. A risk return measure of hedging effectiveness: a reply, J. Finan. Quant. Anal. 22(3), 377-381.] measures.
Subject Finance
Keyword(s) G10
G13
G19
DOI - identifier 10.1016/S1042-444X(01)00036-6
Copyright notice Copyright © 2001 Elsevier Science B.V. All rights reserved
ISSN 1042-444X
Versions
Version Filter Type
Altmetric details:
Access Statistics: 587 Abstract Views  -  Detailed Statistics
Created: Wed, 18 Feb 2009, 09:53:18 EST by Catalyst Administrator
© 2014 RMIT Research Repository • Powered by Fez SoftwareContact us