A NOTE ON UTILITY-BASED FUTURES HEDGING PERFORMANCE MEASURE

This note considers the estimator for the utility-based hedging performance. It shows that the estimator incurs a downward bias, regardless of whether the conventional mean-variance expected utility function or the more general risk-averse utility function is adopted. Consequently, the usefulness of the futures contract is under-estimated. (C) 2011 Wiley Periodicals, Inc. Jrl Fut Mark 32: 92-98, 2012