Simultaneously determined, time-varying hedge ratios in the soybean complex

Garcia, Philip; Roh, Jae Sun; Leuthold, Raymond M.

doi:10.1080/00036849500000095

Cited by 46 publications

(20 citation statements)

References 12 publications

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“…(i) It does not appear that there is any evidence that 8 A reviewer pointed out that I missed the multivariate hedging model proposed by Garcia, Roh, and Leuthold (1995). They attempted to improve hedging performance by using a sophisticated MGARCH model.…”

Section: Conclusion and Recommendationsmentioning

confidence: 94%

The risk management effectiveness of multivariate hedging models in the U.S. soy complex

Collins

2000

J. Fut. Mark.

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Section: Conclusion and Recommendationsmentioning

confidence: 94%

The risk management effectiveness of multivariate hedging models in the U.S. soy complex

Collins

2000

J. Fut. Mark.

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“…Second, since the conditional variances and covariances likely are not constants, empirical estimates should allow for this possibility (for an example and related references, see McNew & Fackler, 1994). Nonetheless, such time-varying covariance estimation is costly and often does not result in greater hedging effectiveness relative to unconditional hedge ratios (Garcia, Roh, & Leuthold 1995;Myers, 1991). 4 Using estimated parameters implies that the estimated returns from the associated decisions can have a large variance around the true (but unknown) optimum (see Chalfant, Collender, & Subramanian, 1990, and references therein).…”

Section: Defining and Estimating The Objective Functionmentioning

confidence: 97%

Risk Management in Agricultural Markets: A Review

Tomek

Peterson

2001

Journal of Futures Markets

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This article surveys and evaluates the current state of knowledge about producers' marketing strategies to manage price and revenue risk for farm commodities. The review highlights gaps between concepts and their implementation. Many well-developed models of price behavior exist, but appropriate characterization and estimation of the probability distributions of commodity prices remain elusive. Hence, the preferred measure of price risk is ambiguous. Numerous models of optimal marketing portfolios for farmers have been specified, but their behavior appears to be inconsistent with most, if not all, of these models. In addition, some research suggests that farmers can earn speculative profits, which is inconsistent with notions of efficient markets. The conclusions discuss what academic research can and cannot accomplish in relation to assisting producers with risk-management decisions.

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“…Noussinov & Leuthold, 1999;Wilson, Nganje, & Wagner, 2006) and for time-varying ratios (e.g. Garcia et al, 1995;Haigh & Holt, 2000). However, this approach essentially assumes an elliptical dependence structure, which may not necessarily hold in practice.…”

Section: Kernel Copulamentioning

confidence: 97%

“…Indeed, when risk reduction is a lesser concern, the profitable return properties of certain assets become more desirable, which can lead to speculative rather than hedging positions. Fackler and McNew (1993) provide a survey and update of the multi-product hedging literature and note that only a small number of studies have previously considered this problem in agricultural economics (with exceptions including Garcia, Roh, & Leuthold, 1995;Tzang & Leuthold, 1990, both for the soybean complex). The results of Fackler and McNew (1993) show that optimal hedge ratios in the soybean complex are slightly higher than if they were estimated individually.…”

Section: Multi-commodity Hedgingmentioning

confidence: 99%

Dealing with downside risk in a multi‐commodity setting: A case for a “Texas hedge”?

Power

Vedenov

2009

Journal of Futures Markets

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The authors thank an anonymous reviewer and the editor, Robert I. Webb, for their helpful comments, which improved the quality of the manuscript. The authors are grateful to David Anderson and Steven Klose for their help with locating data and for useful discussion of the feedlot operation model. The authors acknowledge financial support from Hatch projects RI-9262 and TEX09258. GABRIEL J. POWER* DMITRY VEDENOVThis study analyzes the problem of multi-commodity hedging from the downside risk perspective. The lower partial moments (LPM 2 )-minimizing hedge ratios for the stylized hedging problem of a typical Texas panhandle feedlot operator are calculated and compared with hedge ratios implied by the conventional minimumvariance (MV) criterion. A kernel copula is used to model the joint distributions of cash and futures prices for commodities included in the model. The results are consistent with the findings in the single-commodity case in that the MV approach leads to over-hedging relative to the LPM 2 -based hedge. An interesting and somewhat unexpected result is that minimization of a downside risk criterion in a multicommodity setting may lead to a "Texas hedge" (i.e. speculation) being an optimal strategy for at least one commodity.

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Simultaneously determined, time-varying hedge ratios in the soybean complex

Cited by 46 publications

References 12 publications

The risk management effectiveness of multivariate hedging models in the U.S. soy complex

The risk management effectiveness of multivariate hedging models in the U.S. soy complex

Risk Management in Agricultural Markets: A Review

Dealing with downside risk in a multi‐commodity setting: A case for a “Texas hedge”?

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