Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index

We consider alternative possibilities for hedging spot positions on the FTSE LATIBEX Index, the index of the only international market exclusively for Latin American firms that is denominated by the euro. Since there is not a futures market on the index, it is unclear whether a relatively successful...

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Autores principales:	Pablo Urtubia, Alfonso Novales, Andrés Mora-Valencia
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	cross-hedging futures markets hedging efficiency asymmetric multivariate GARCH models Mathematics QA1-939
Acceso en línea:	https://doaj.org/article/21ae80647a074c20b9f4fcb6a87b6cc8
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id	oai:doaj.org-article:21ae80647a074c20b9f4fcb6a87b6cc8
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spelling	oai:doaj.org-article:21ae80647a074c20b9f4fcb6a87b6cc82021-11-11T18:17:10ZCross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index10.3390/math92127362227-7390https://doaj.org/article/21ae80647a074c20b9f4fcb6a87b6cc82021-10-01T00:00:00Zhttps://www.mdpi.com/2227-7390/9/21/2736https://doaj.org/toc/2227-7390We consider alternative possibilities for hedging spot positions on the FTSE LATIBEX Index, the index of the only international market exclusively for Latin American firms that is denominated by the euro. Since there is not a futures market on the index, it is unclear whether a relatively successful hedge can be found. We explore the plausibility of employing futures on four stock market indices: EUROSTOXX 50, S&P500, BOVESPA, and IPC, and simulate the results that could be obtained by a hedge position based on either unconditional or conditional second order moments estimated from different asymmetric GARCH models. Several criteria for hedging effectiveness suggest that futures contracts on BOVESPA should be preferred, and that a salient reduction in risk can be achieved over the unhedged LATIBEX portfolio. The evidence in favor of a better performance of conditional moments is very clear, without significant differences among the alternative GARCH specifications.Pablo UrtubiaAlfonso NovalesAndrés Mora-ValenciaMDPI AGarticlecross-hedgingfutures marketshedging efficiencyasymmetric multivariate GARCH modelsMathematicsQA1-939ENMathematics, Vol 9, Iss 2736, p 2736 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	cross-hedging futures markets hedging efficiency asymmetric multivariate GARCH models Mathematics QA1-939
spellingShingle	cross-hedging futures markets hedging efficiency asymmetric multivariate GARCH models Mathematics QA1-939 Pablo Urtubia Alfonso Novales Andrés Mora-Valencia Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index
description	We consider alternative possibilities for hedging spot positions on the FTSE LATIBEX Index, the index of the only international market exclusively for Latin American firms that is denominated by the euro. Since there is not a futures market on the index, it is unclear whether a relatively successful hedge can be found. We explore the plausibility of employing futures on four stock market indices: EUROSTOXX 50, S&P500, BOVESPA, and IPC, and simulate the results that could be obtained by a hedge position based on either unconditional or conditional second order moments estimated from different asymmetric GARCH models. Several criteria for hedging effectiveness suggest that futures contracts on BOVESPA should be preferred, and that a salient reduction in risk can be achieved over the unhedged LATIBEX portfolio. The evidence in favor of a better performance of conditional moments is very clear, without significant differences among the alternative GARCH specifications.
format	article
author	Pablo Urtubia Alfonso Novales Andrés Mora-Valencia
author_facet	Pablo Urtubia Alfonso Novales Andrés Mora-Valencia
author_sort	Pablo Urtubia
title	Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index
title_short	Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index
title_full	Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index
title_fullStr	Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index
title_full_unstemmed	Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index
title_sort	cross-hedging portfolios in emerging stock markets: evidence for the latibex index
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/21ae80647a074c20b9f4fcb6a87b6cc8
work_keys_str_mv	AT pablourtubia crosshedgingportfoliosinemergingstockmarketsevidenceforthelatibexindex AT alfonsonovales crosshedgingportfoliosinemergingstockmarketsevidenceforthelatibexindex AT andresmoravalencia crosshedgingportfoliosinemergingstockmarketsevidenceforthelatibexindex
_version_	1718431869948657664

Cross-Hedging Portfolios in Emerging Stock Markets: Evidence for the LATIBEX Index

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