Hedging effectiveness in Greek stock index futures market, 1999-2001

This paper examines hedging effectiveness in Greek stock index futures market. We focus on various techniques to estimate variance reduction from constant and time-varying hedge ratios. For both available stock index futures contracts of the Athens Derivatives Exchange (ADEX), we employ a variety of models to derive and estimate the effectiveness of hedging. We measure hedging effectiveness using three different methods: (i) the OLS method, (ii) the method of Ederington (1979), and (iii) the method suggested by Park and Switzer (1995). In both cases for Greek stock index futures, the hedge ratio from MGARCH model provides greater variance reduction, in line with similar findings in the literature. These findings are helpful to risk managers dealing with Greek stock index futures.