TITLE:
Samuelson Effect and Hedging Effectiveness in the CSI 300 Index Futures
AUTHORS:
Chunchou Wu
KEYWORDS:
Samuelson Effect, Hedge Effectiveness, Volatility, Optimal Hedge Ratio
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.14,
October
19,
2018
ABSTRACT: In this paper, we adopt the CSI 300 index futures to
discuss the Samuelson effect and dissect the hedging results under both time
varying volatility and futures maturities. We propose the conclusion that there
is no Samuelson effect embedded in the CSI 300 Index Futures. Meanwhile, this
paper infers that the optimal hedge ratios are different that is related to
without and with random volatility. The maturity effect for CSI 300 index futures
is also found to have a salient effect to the hedging effectiveness and the
optimal hedge ratio. There is an important implication in futures hedging for
this empirical study. Due to the futures hedging will relate to the time
varying maturities, the maturity effect should be incorporated into
consideration when hedge activity is in the process. Ignoring to deal with the
effect of maturity in hedging will induce uncertain risk exposures and lead to
over hedging.