Estimation of Time-Varying Hedge Ratios for Corn and Soybeans: Bgarch and Random Coefficient Approaches

Sankhya, Series B, 1998

Posted: 10 Aug 1999

See all articles by Anil K. Bera

Anil K. Bera

University of Illinois at Urbana-Champaign - Department of Economics

Philip Garcia

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Jae-Sun Roh

Seoul National University - Department of Agricultural Economics

Multiple version iconThere are 2 versions of this paper

Abstract

This paper is concerned with estimation of optimal hedge ratios. Many researchers have demonstrated the inadequancies of the ordinary least squares (OLS) method that gives constant hedge ratio and suggested the use of bivariate autoregressive conditional heteroskedastic (BGARCH) model. We introduce the use of a random coefficient autoregressive (RCAR) model to estimate time varying hedge ratios. Using daily data of spot and future prices of corn and soybeans we find substantial presence of both ARCH and random coefficient effects. Hedging performance in terms of variance reduction of returns from alternative models have also been conducted.

Note: This is a description of the paper and is not the actual abstract.

JEL Classification: G13

Suggested Citation

Bera, Anil K. and Garcia, Philip and Roh, Jae-Sun, Estimation of Time-Varying Hedge Ratios for Corn and Soybeans: Bgarch and Random Coefficient Approaches. Sankhya, Series B, 1998, Available at SSRN: https://ssrn.com/abstract=151370

Anil K. Bera (Contact Author)

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States
217-333-4596 (Phone)
217-244-6678 (Fax)

Philip Garcia

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
427 Mumford Hall
Urbana, IL 61801
United States
217-333-0644 (Phone)
217-333-5538 (Fax)

Jae-Sun Roh

Seoul National University - Department of Agricultural Economics

Seoul, 151-742
Korea

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
738
PlumX Metrics