Financial and energy exchange traded funds futures: an evidence of spillover and portfolio hedging

This paper examines spillover from financial exchange-traded funds (ETF) futures to energy ETF futures using adjusted daily data extending from April 2, 2009, to November 23, 2020. We also explore the portfolio hedging-based conditional variance and co-variance derived from dynamic conditional corre...

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Vydáno v:Annals of operations research Ročník 333; číslo 1; s. 501 - 516
Hlavní autoři: Yadav, Miklesh Prasad, Bhatia, Shikha, Singh, Nidhi, Islam, Md Tarikul
Médium: Journal Article
Jazyk:angličtina
Vydáno: New York Springer US 01.02.2024
Springer
Springer Nature B.V
Témata:
Analysis
Business and Management
Causality
Combinatorics
Crude oil
Exchange traded funds
Futures
Hedging
Hedging (Finance)
Natural gas
Operations Research/Decision Theory
Original Research
Theory of Computation
India
Energy ETF
Spillover
Financial ETF
Portfolio hedging
Dynamic connectedness
ISSN:0254-5330, 1572-9338
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Shrnutí:This paper examines spillover from financial exchange-traded funds (ETF) futures to energy ETF futures using adjusted daily data extending from April 2, 2009, to November 23, 2020. We also explore the portfolio hedging-based conditional variance and co-variance derived from dynamic conditional correlation. The proxies for the financial ETF futures are financial select sector SPDR fund (XLF) and generic 1st S&P 500 index futures (SP1) while generic 1st crude oil WTI futures (CL1), generic 1st natural gas futures (NG1), and energy select SPDR fund (XLE) are proxies of energy ETF futures. The results obtained from Granger causality indicate that there is unidirectional causality from RXLF to RSP1 while bidirectional causality between RXLF and RCL1 at a 5% significance level. Further, dynamic conditional correlation indicates the spillover effect from RXLF to RCL1, RXLF to RXLE, RSP1 to RCL1, and RSP1 to RXLE both in the short-run and long run. The spillover from RXLF to RNG1 is witnessed only in the short run while the spillover from RSP1 to RNG1 is present in long run. The present study corroborates with the studies of Chang et al. (Int J Finan Stud 6(2): 1–24, 2018) and Lau et al. (Int Rev Finan Anal 52: 316-332, 2017). We notice that the average optimal hedge ratio of the RXLF/RNG1 pair is the most expensive while the cheapest hedging strategy is of RSP1/RCL1 pair.
Bibliografie:ObjectType-Article-1
SourceType-Scholarly Journals-1
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ISSN:0254-5330
1572-9338
DOI:10.1007/s10479-022-04538-1