Title: Testing the martingale hypothesis for futures prices: implications for hedgers
Authors: de Ville de Goyet, Cédric ×
Dhaene, Geert
Sercu, Piet #
Issue Date: Nov-2008
Series Title: The Journal of futures markets vol:28 issue:11 pages:1040-1065
Abstract: The martingale hypothesis for futures prices is investigated using a nonparametric approach where it is assumed that the expected futures returns depend nonparametrically) on a linear combination of predictors. We first collapse the predictors into a single-index variable where the weights are identified up to scale, using the average derivative estimator proposed by Stoker
(1986). We then use the Nadaraya-Watson kernel estimator to calculate (and visually depict) the relation between the estimated index and the expected futures returns. An application to four agricultural commodity futures illustrates the technique. Out-of-sample results indicate
that for soybeans, wheat, and oats, the estimated index contains statistically significant information regarding the expected futures returns. We discuss implications of this finding for a non-infinitely risk-averse hedger.
ISSN: 0270-7314
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center of Econometrics, Leuven
Research Center International Finance, Leuven
× corresponding author
# (joint) last author

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