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Hedging Effectiveness of Index Futures Contract: The Case of S&P CNX Nifty

Global Journal of Finance and Management, Vol. 3, No. 1, pp. 77-89, 2011

14 Pages Posted: 29 Jun 2011 Last revised: 17 Oct 2011

A N Sah

UPES, Dehradun

Krishan Kumar Pandey

O.P.Jindal Global University

Date Written: June 29, 2011

Abstract

Futures market performs an important function which is to provide effective hedging besides price discovery at distant future date to the market participants. The hedging effectiveness of the futures contract shows its utility in reducing the amount of risk. We estimated the effective hedge ratio and its hedging effectiveness for the S&P CNX Nifty futures using daily data from 12 June 2000 to 24 December 2008 by three models. The study found that Nifty futures contract provides effective hedging to the market players for hedging purpose.

Keywords: Error correction models (ECMs), Minimum variance hedge ratio (MVHR), GARCH, OLS hedge

JEL Classification: A1, B2, B4, C5

Suggested Citation

Sah, A N and Pandey, Krishan Kumar, Hedging Effectiveness of Index Futures Contract: The Case of S&P CNX Nifty (June 29, 2011). Global Journal of Finance and Management, Vol. 3, No. 1, pp. 77-89, 2011. Available at SSRN: https://ssrn.com/abstract=1874526

Ash Narayan Sah

UPES, Dehradun ( email )

Energy Acres
P.O. Bidholi via Premnagar,
Dehradun, IN 248007
India

Krishan K. Pandey (Contact Author)

O.P.Jindal Global University ( email )

Jindal Global Business School, O P Jindal Global
University,Sonipat Narela Road,Near Jagdishpur Vil
Sonipat, Haryana 131001
India

HOME PAGE: http://www.jgu.edu.in

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