Efficiency of Hedging Against Fluctuating Prices of Dairy Products

  • Jan Koeman University of Canterbury
  • Jędrzej Białkowski University of Canterbury
DOI: https://doi.org/10.24135/afl.v4i1and2.27
Keywords: Agricultural commodities, CME dairy futures, Cross-hedging, Dairy, Error Correction Model, New Zealand Stock Exchange dairy futures

Abstract

This paper investigates hedging and cross-hedging internationally traded milk derivative products with internationally traded commodities, recently launched New Zealand dairy futures, New Zealand agricultural products, and mature United States dairy market futures. The contribution of the paper is twofold. First, we show that international dairy commodities are a distinct commodities subgroup, as changes in prices of dairy products are uncorrelated with other worldwide traded commodities. Second, we show that New Zealand Stock Exchange dairy futures are an effective tool for hedging exposure to smaller size trades and may not necessarily be of large positions as required by cooperatives and multinationals

Downloads

Download data is not yet available.

Author Biographies

Jan Koeman, University of Canterbury

Jan Koeman is a PHD Candidate at the University of Canterbury, Christchurch, New Zealand

Jędrzej Białkowski, University of Canterbury

Jędrzej Białkowski is Associate Professor of Finance at the University of Canterbury, Christchurch, New Zealand

Published
2015-11-30
How to Cite
Koeman, J., & Białkowski, J. (2015). Efficiency of Hedging Against Fluctuating Prices of Dairy Products. Applied Finance Letters, 4(1 & 2), 6-11. https://doi.org/10.24135/afl.v4i1and2.27
Issue
Vol. 4 No. 1 & 2 (2015): Commodities & Derivatives
Section
Articles submitted to regular issue

Copyright (c) 2016 Jan Koeman, Jędrzej Białkowski

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Authors submitting articles for publication warrant that the work is not an infringement of any existing copyright and will indemnify the publisher against any breach of such warranty. By publishing in Applied Finance Letters, the author(s) retain copyright but agree to the dissemination of their work through Applied Finance Letters.

By publishing in Applied Finance Letters, the authors grant the Journal a Creative Commons nonexclusive worldwide license (CC-BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License) for electronic dissemination of the article via the Internet, and, a nonexclusive right to license others to reproduce, republish, transmit, and distribute the content of the journal. The authors grant the Journal the right to transfer content (without changing it), to any medium or format necessary for the purpose of preservation.

Authors agree that the Journal will not be liable for any damages, costs, or losses whatsoever arising in any circumstances from its services, including damages arising from the breakdown of technology and difficulties with access.