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Hedge Ratio Variation Under Different Energy Market Conditions: New Evidence by Using Quantile–Quantile Approach

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Global Economic Challenges

Part of the book series: Springer Proceedings in Business and Economics ((SPBE))

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Abstract

In this research, we investigated the long-run and causal relationships between spot and futures prices of crude oil, natural gas, and gasoline using monthly data and considering the variables’ distribution. The quantile co-integration and quantile causality tests provided strong evidence for the long-run and causal relationships among the variables. Furthermore, we examined the optimal hedge ratio (OHR) at different quantiles of the series using the recently developed quantile on the quantile approach. For all three commodities, our results confirmed the asymmetric response of the spot market to the futures market. Furthermore, our findings show that in a bullish market and for a large positive shock, the value of OHR is significantly greater than one. We observed lower fluctuations in the OHR as the maturities of the futures contracts increased. We discuss the policy implications of our research in detail in the Conclusion section.

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Authors and Affiliations

  1. Department of Banking and Finance, Eastern Mediterranean University, Famagusta, North Cyprus via Mersin 10, Turkey

    Karim Barati

  2. School of Economics, Finance and Banking, College of Business, University Utara, Bukit Kayu Hitam, Kedah, Malaysia

    Arshian Sharif

  3. Department of Finance and Banking, Ankara HBV University, Ankara, Turkey

    Korhan K. Gökmenoğlu

Authors
  1. Karim Barati
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  2. Arshian Sharif
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  3. Korhan K. Gökmenoğlu
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Editor information

Editors and Affiliations

  1. Department of Banking and Finance, Eastern Mediterranean University, Famagusta, Türkiye

    Nesrin Özataç

  2. Department of Finance and Banking, Ankara HBV University, Ankara, Türkiye

    Korhan K. Gökmenoğlu

  3. Department of Political Economy and Public Finance, University of Castilla-La Mancha, Cuenca, Spain

    Daniel Balsalobre Lorente

  4. Department of Banking and Finance, Eastern Mediterranean University, Famagusta, Türkiye

    Nigar Taşpınar

  5. Department of Banking and Finance, Rauf Denktas University, Nicosia, Türkiye

    Bezhan Rustamov

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Barati, K., Sharif, A., Gökmenoğlu, K.K. (2023). Hedge Ratio Variation Under Different Energy Market Conditions: New Evidence by Using Quantile–Quantile Approach. In: Özataç, N., Gökmenoğlu, K.K., Balsalobre Lorente, D., Taşpınar, N., Rustamov, B. (eds) Global Economic Challenges. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-23416-3_1

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