Resource title

Hedging sectoral risk across European equity markets: an empirical analysis of alternative hedging strategies

Resource image

image for OpenScout resource :: Hedging sectoral risk across European equity markets: an empirical analysis of alternative hedging strategies

Resource description

We first construct indices for shares in five European sectors (banking, chemicals, insurance, oil and retail) and estimate the fair prices that a (currently unavaible) futures contract on each one of these indices would have had if it existed. We then show that hedging the sectoral exposure of a diversified portfolio of pan-European shares in the same sector with those futures contracts provides a superior risk-cover than an alternative hedging strategy using futures contracts based on either a cocktail of domestic stock market indices or a pan-European stock market index. We conclude that the introduction of futures contracts on pan-European sectoral indices should increase the efficiency of both the cash and futures European equity markets

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp1996/96-23.pdf

Resource license

Copyright INSEAD. All rights reserved