Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

This study estimates the minimum variance hedge ratios of WTI crude oil futures prices with different maturities, and investigates whether the hedging effects among the hedging instruments are significantly different. Based on the Bayesian approach using a Gibbs sampling, the posterior distributions for the differences of hedging effectiveness and Sharpe ratio by instrument are derived, and the null hypothesis is tested by examining the characteristics of distributions. The sample is composed of weekly prices of every Friday for the spot and three nearby futures of NYMEX. The sample covers the period of January 1997 to February 2007. According to the empirical results, the hedge ratios and the hedging effectiveness of every hedging instrument generally increase as the hedging period expands. Also, the differences of hedge ratios and hedging effectiveness among the different maturities turn out to be statistically significant. However, the relative superiority among the hedging instruments in terms of Sharpe ratio turns out to be statistically significant only for the above certain period of time.