The Hedging Performance of Stock Index Futures : The Case of the Athens Derivatives Exchange

This paper examines the hedging effectiveness of the FTSE/ATHES-20 and FTSE/ATHEX Mid-40 stock index futures contracts in the relatively new and fairly unresearched futures market of Greece. Both in sample and out of sample hedging performances using weekly and daily data are examined, considering both constant and time varying hedge ratios. Results indicate that time varying hedging strategies provide minimal incremental risk-reduction benefits in sample, but under-perform simple constant hedging strategies out of sample. Moreover, futures contracts serve effectively their risk management role and compare favorably with results in order international stock index futures markets. Estimation of investor results, in terms of model selection. For the FTSE/ATHEX Mid-40 contracts we identify the existence of speculative components, which lead to utility maximizing hedge ratios, which are lower than minimum variance hedge rations