Abstract
Using a hand-collected data, we provide evidence that U.S. oil and gas producers generate profits on average from their use of derivatives in hedging, indicating that it is a positive NPV project. The profits are positively related to the intensity of hedging. Further decomposition shows that the profits are strongly and positively related to the market timing component in hedging. The hedging profits reveal nonlinear feedback effects on the hedge ratio in the subsequent period. Winners hedge more when they gain more while losers also hedge more when they lose more.
Original language | American English |
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State | Published - 11 Apr 2015 |
Externally published | Yes |
Event | 2015 Eastern Finance Association Annual Meeting - New Orleans, LA Duration: 11 Apr 2015 → … |
Conference
Conference | 2015 Eastern Finance Association Annual Meeting |
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Period | 11/04/15 → … |
Keywords
- derivative
- feedback effect
- hedging
- market timing
- risk management
EGS Disciplines
- Finance and Financial Management