Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India

<p>This article examines the cross-hedging performance of crude futures against the tyre equity futures to hedge the tyre equity stocks. Three multivariate conditional volatility models, namely constant conditional correlation (CCC), dynamic conditional correlation (DCC) and diagonal BEKK are...

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Autores principales:	K. Abhaya Kumar, Prakash Pinto, Iqbal Thonse Hawaldar, K. G. Ramesh
Formato:	article
Lenguaje:	EN
Publicado:	EconJournals 2021
Materias:	Environmental sciences GE1-350 Energy industries. Energy policy. Fuel trade HD9502-9502.5
Acceso en línea:	https://doaj.org/article/c9eac7f47f504a0c8962688caa61b14c
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spelling	oai:doaj.org-article:c9eac7f47f504a0c8962688caa61b14c2021-11-12T07:27:32ZCan Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India2146-4553https://doaj.org/article/c9eac7f47f504a0c8962688caa61b14c2021-11-01T00:00:00Zhttps://econjournals.com/index.php/ijeep/article/view/11863https://doaj.org/toc/2146-4553<p>This article examines the cross-hedging performance of crude futures against the tyre equity futures to hedge the tyre equity stocks. Three multivariate conditional volatility models, namely constant conditional correlation (CCC), dynamic conditional correlation (DCC) and diagonal BEKK are applied. Using the conditional covariance and variance from the MGARCH estimates, the optimal hedge ratios (OHRs) are computed. The results of this study show that the volatility spillover exists between the returns of crude oil futures and tyre equity. However, for tyre equities, the best cross hedge is tyre equity futures rather than crude futures. All the MGARCH estimates show better hedging possibility with tyre equity futures, particularly MRF futures.</p><p><strong>Keywords</strong>: CCC; Crude future; DCC; Diagonal BEKK; Tyre equity; Tyre equity futures</p><p><strong>JEL Classifications: </strong>G21; G30</p><p>DOI: <a href="https://doi.org/10.32479/ijeep.11863">https://doi.org/10.32479/ijeep.11863</a></p>K. Abhaya KumarPrakash PintoIqbal Thonse HawaldarK. G. RameshEconJournalsarticleEnvironmental sciencesGE1-350Energy industries. Energy policy. Fuel tradeHD9502-9502.5ENInternational Journal of Energy Economics and Policy, Vol 11, Iss 6, Pp 523-537 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Environmental sciences GE1-350 Energy industries. Energy policy. Fuel trade HD9502-9502.5
spellingShingle	Environmental sciences GE1-350 Energy industries. Energy policy. Fuel trade HD9502-9502.5 K. Abhaya Kumar Prakash Pinto Iqbal Thonse Hawaldar K. G. Ramesh Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India
description	<p>This article examines the cross-hedging performance of crude futures against the tyre equity futures to hedge the tyre equity stocks. Three multivariate conditional volatility models, namely constant conditional correlation (CCC), dynamic conditional correlation (DCC) and diagonal BEKK are applied. Using the conditional covariance and variance from the MGARCH estimates, the optimal hedge ratios (OHRs) are computed. The results of this study show that the volatility spillover exists between the returns of crude oil futures and tyre equity. However, for tyre equities, the best cross hedge is tyre equity futures rather than crude futures. All the MGARCH estimates show better hedging possibility with tyre equity futures, particularly MRF futures.</p><p><strong>Keywords</strong>: CCC; Crude future; DCC; Diagonal BEKK; Tyre equity; Tyre equity futures</p><p><strong>JEL Classifications: </strong>G21; G30</p><p>DOI: <a href="https://doi.org/10.32479/ijeep.11863">https://doi.org/10.32479/ijeep.11863</a></p>
format	article
author	K. Abhaya Kumar Prakash Pinto Iqbal Thonse Hawaldar K. G. Ramesh
author_facet	K. Abhaya Kumar Prakash Pinto Iqbal Thonse Hawaldar K. G. Ramesh
author_sort	K. Abhaya Kumar
title	Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India
title_short	Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India
title_full	Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India
title_fullStr	Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India
title_full_unstemmed	Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India
title_sort	can crude oil futures be the good hedging tool for tyre equities? evidence from india
publisher	EconJournals
publishDate	2021
url	https://doaj.org/article/c9eac7f47f504a0c8962688caa61b14c
work_keys_str_mv	AT kabhayakumar cancrudeoilfuturesbethegoodhedgingtoolfortyreequitiesevidencefromindia AT prakashpinto cancrudeoilfuturesbethegoodhedgingtoolfortyreequitiesevidencefromindia AT iqbalthonsehawaldar cancrudeoilfuturesbethegoodhedgingtoolfortyreequitiesevidencefromindia AT kgramesh cancrudeoilfuturesbethegoodhedgingtoolfortyreequitiesevidencefromindia
_version_	1718431135673876480

Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India

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