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International Journal For Multidisciplinary Research
E-ISSN: 2582-2160
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Volume 6 Issue 4
July-August 2024
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Exploring the Effectiveness of Hedging in the Indian Commodity Market: A Comparative Analysis of Constant and Dynamic Hedge Ratios Across Agricultural and Non-Agricultural Commodities
Author(s) | Anagha Jose, Nithin Jose |
---|---|
Country | India |
Abstract | This paper delves into the effectiveness of hedging strategies within the Indian commodity market context, encompassing both constant and dynamic optimal hedge ratios. It scrutinizes the performance of hedging across agricultural and non-agricultural commodities, aiming to provide crucial insights into market dynamics for investors and policymakers. Utilizing a sample comprising 13 highly traded commodity futures contracts spanning various commodities such as gold, silver, copper, zinc, aluminium, nickel, lead, cardamom, Mentha oil, cotton, crude palm oil, crude oil, and natural gas, the study investigates hedging effectiveness from 2008 to 2024. Employing Vector Error Correction Model (VECM) and Constant Conditional Correlation Multivariate Generalized Autoregressive Conditional Heteroskedasticity (CCC-MGARCH) models, the paper estimates constant hedge ratios and dynamic hedge ratios, respectively. The study shows that agricultural future contracts provide higher hedging effectiveness (30%) as compared to non-agricultural commodity futures (20%) Understanding the nuances of hedging effectiveness not only aids investors in making informed decisions but also facilitates the development of robust risk management strategies in the Indian commodity market. |
Keywords | Hedging effectiveness, Commodity futures, Dynamic hedge ratio |
Published In | Volume 6, Issue 4, July-August 2024 |
Published On | 2024-07-26 |
Cite This | Exploring the Effectiveness of Hedging in the Indian Commodity Market: A Comparative Analysis of Constant and Dynamic Hedge Ratios Across Agricultural and Non-Agricultural Commodities - Anagha Jose, Nithin Jose - IJFMR Volume 6, Issue 4, July-August 2024. |
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E-ISSN 2582-2160
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CrossRef DOI is assigned to each research paper published in our journal.
IJFMR DOI prefix is
10.36948/ijfmr
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