The Empirical Study Of The Optimal Hedge Ratios Estimation Model In China Stock Index Futures Market

Hedging theory attracts the attention of the enterprise risk managers andscholars. The China’s research on hedging strategy mainly focused on the calculationmodel of the Optimal Hedge Ratio and the hedging performance evaluation. Thispaper introduce a new calculating model, named the Robust Estimation Model whichsolved the defects of mainstream models and empirically proved more effective thanmainstream ones in foreign countries and Taiwan market. At present, RobustEstimation rarely used in domestic study, this paper mainly introduces this modeland verify it’s effectiveness in China futures market.In this paper, the empirical results indicate that:(1) Use the percentage reduction in hedged portfolio variance, which containedby HE index, as the hedging evaluation criteria, the Robust Estimation performsbadly than the standard estimation. In this case, we can choose the EWMA standardestimation that the=0.98to calculate the optimal hedging ratio.(2) Use the virance of the optimal hedging ratio as the hedging evaluation criteria, therobust estimation is efficient because it has a stable optimal hedge ratio which canmassively reduce the transaction cost. In this case, we can choose the rolling windowrobust estimation that the window length m=50which has the most stable optimalhedge ratio.This paper introduces robust estimation model to calculate the optimal hedgeratio. The empirical results show that the robust estimation is empirical at someconditions. While in the practice we can choose the specific calculation model of theoptimal hedging ratio according to the transaction cost and the adjustment frequency.