Eling and Schuhmacher (2007) compared the Sharpe ratio with other performance measures and found virtually identical rank ordering using hedge fund data. They conclude that the choice of performance measure has no critical influence on fund evaluation and that the Sharpe ratio is generally adequate for analyzing hedge funds. Nevertheless, their analysis does not include the class of tailor-made...

This paper investigates the hedging effectiveness of the Standard & Poor’s (S&P) 500 stock index futures contract using weekly settlement prices for the period July 3, 1992 to June 30, 2002. Particularly, it focuses on three areas of interest: the determination of the appropriate model for estimating a hedge ratio that minimizes the variance of returns; the hedging effectiveness and the stabili...

Financial and insurance theories explain that large widely-held corporations manage corporate risks if doing so is cost-effective to reduce frictional costs such as taxes, agency costs and financial distress costs. A large number of previous empirical studies, most in the U.S., have tested the hypotheses underlying corporate risk management with financial derivative instruments. In order to qua...

This paper utilises a new approach for determining minimum variance hedge ratio in stock index futures markets. More specifically, the performance of time-varying hedge ratios generated from Markov Regime Switching (MRS) models is investigated. The rational behind the use of these models stems from the fact that the dynamic relationship between spot and futures returns may be characterised by r...