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Öğe Estimation of static and dynamic optimal hedge ratios: an application to the bist30 index futures(İstanbul Bilgi Üniversitesi, 2021) Uçar, Selin; Öztürk, Serda SelinABSTRACT: Especially in recent years, due to fluctuations in both domestic and international financial market, investors pay more attention to control the risks exposed due to their positions in the markets. Various econometric methods have been developed to estimate the optimal hedge ratio. In the literature, some of researchers studied with the static models, while others used dynamics models for estimation of the optimal hedge ratio. The aim of this paper is determining the optimal hedge ratio by providing a comparision of various econometric models. The daily closing prices of BIST 30 Index and BIST30 Index Futures are used for forecasting and the optimal hedge ratio are estimated by employing static models such as the Ordinary Least Squared (OLS) model, the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models , the Error Correction Model (ECM) and the Vector Error Correction Model (VECM). Also we employ the bivariate VECMDiag- BEKK-GARCH model to estimate dynamic hedge ratio. The hedging performance is measured in terms of the variance reduction provided by each models. According to the findings, the VECM and the GARCH models provide only slightly better performance than the traditional linear regression model and the bivariate VECM-Diag-BEKK-GARCH model fails to outperformed the static models.
