Robust Estimation of beta and the hedging ratio in Stock Index Futures In the Integrated Latin American Market

Authors

  • Juan Carlos Gutierrez Betancur Universidad EAFIT
  • Astrid Katherine Gutiérrez Díaz Empresas Públicas de Medellín
  • Andrés Gómez Fernández Empresas Públicas de Medellín

DOI:

https://doi.org/10.17230/ecos.2017.44.2

Keywords:

Estimation of beta, robust statistics MM (RMM), ordinary least squares (OLS), hedging ratio with stock MILA market index futures.

Abstract

This paper examines the effect exerted by outliers in the equity betas in the Integrated Latin American Market (MILA), estimated by two different methods: ordinary least squares (OLS) and robust estimation (RMM). To illustrate the empirical relevance of the estimated betas, we evaluate the hedging ratio using stock index futures. The results indicate that the estimates made by the RMM method provide a better fit and increase the efficiency of a hedging strategy when there are outliers in the estimation window of beta.

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Author Biographies

  • Juan Carlos Gutierrez Betancur, Universidad EAFIT
    Profesor, Departamento de Finanzas.
  • Astrid Katherine Gutiérrez Díaz, Empresas Públicas de Medellín
    Egresada de Maestría en Ciencias en Finanzas, EAFIT.
  • Andrés Gómez Fernández, Empresas Públicas de Medellín
    Egresado de Maestría en Ciencias en Finanzas, EAFIT.

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Published

2017-06-22

Issue

Vol. 21 No. 44 (2017)

Section

Articles

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How to Cite

Gutierrez Betancur, J. C., Gutiérrez Díaz, A. K., & Gómez Fernández, A. (2017). Robust Estimation of beta and the hedging ratio in Stock Index Futures In the Integrated Latin American Market. Ecos de Economía, 21(44), 37-71. https://doi.org/10.17230/ecos.2017.44.2

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