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Mixed results have been documented for the performance of hedging strategies using futures. This paper reinvestigates this issue using an extensive set of performance evaluation metrics across seven international markets. We compare the hedging performance of short and long hedgers using traditional variance based approaches together with modern risk management techniques including Value at Risk, Conditional Value at Risk and approaches based on Downside Risk. Our findings indicate that using these metrics to evaluate hedging performance, yields differences in terms of best hedging strategy as compared with the traditional variance measure. We also find significant differences in performance between short and long hedgers. These results are observed both in-sample and out-of-sample.
Hanly, J., Cotter, J.: Re-evaluating Hedging Performance. Journal of Futures Markets, 26 (7): 677-702