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Hedging index exchange traded funds
journal contribution
posted on 2023-06-08, 12:21 authored by Carol AlexanderCarol Alexander, A BarbosaThis paper presents an empirical comparison of the out of sample hedging performance from naïve and minimum variance hedge ratios for the four largest US index exchange traded funds (ETFs). Efficient hedging is important to offset long and short positions on market maker’s accounts, particularly imbalances in net creation or redemption demands around the time of dividend payments. Our evaluation of out of sample hedging performance includes aversion to negative skewness and excess kurtosis. The results should be of interest to hedge funds employing tax arbitrage or leveraged long–short equity strategies as well as to ETF market makers.
History
Publication status
- Published
Journal
Journal of Banking and FinanceISSN
0378-4266Publisher
ElsevierExternal DOI
Issue
2Volume
32Page range
326-337Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-09-11Usage metrics
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