The opportunity cost of hedging under incomplete information: Evidence from ETF/Ns
研究了在估计风险下，决策者使用ETF/N进行对冲时的最优对冲比率问题，通过回测量化机会成本，为散户投资者提供指导。
Abstract This paper considers the optimal hedge ratio problem under estimation risk. Due to incomplete information, the decision‐maker evaluates the opportunity cost of hedging using exchange‐traded funds or notes (ETF/Ns). Using a backtesting procedure over the last 5 years and 13 different hedging instruments—both inverse‐equity ETFs and volatility ETNs—we quantify the proposed opportunity cost using different out‐of‐sample performance metrics. Given the greater accessibility of commission‐free brokers for small investors along with the popularity of ETF/Ns, our paper appeals to retail investors and provides guidance in terms of choosing the optimal hedge ratio under estimation risk.