*** READ IN DATA
OPEN DATA SpotFutures.xls
CALENDAR 2002 2 12
ALL 2007:07
DATA(FORMAT=XLS,ORG=COLUMNS) 2002:02 2007:07 Spot Futures

*** PRINT SPOT AND FUTURES PRICES
PRINT 2002:02 2007:07 Spot Futures

*** CONSTRUCT SERIES OF SPOT AND FUTURES RETURNS
SET RSPOT = 100*LOG(SPOT/SPOT{1})
SET RFUTURES = 100*LOG(FUTURES/FUTURES{1})

*** SOME STATISTICAL SUMMARIES (DESCRIPTIVE STATISTICS)
STAT RSPOT
STAT RFUTURES

*** REGRESS THE SPOT RETURNS ON THE FUTURES RETURNS, SAVING THE RESIDUALS
LINREG RSPOT / RESIDS
# CONSTANT RFUTURES

*** NOW COMPUTE THE PERCENTAGE FALL IN VARIANCE FROM HEDGING IN-SAMPLE WITH THE OLS HEDGE RATIO
*** COMPARED WITH NO HEDGING
STATS(NOPRINT) RSPOT
COM RSPOTVAR = %VARIANCE
STATS(NOPRINT) RESIDS
COM RESIDSVAR = %VARIANCE
COM FALL = 100*(RSPOTVAR-RESIDSVAR)/RSPOTVAR
DIS 'SPOT RETURN VARIANCE=' RSPOTVAR ', HEDGED PORTFOLIO' $
'VARIANCE=' RESIDSVAR '% FALL IN VARIANCE=' FALL

*** TEST THE HYPOTHESIS THAT THE SLOPE COEFFICIENT IN THE RETURNS REGRESSION IS 1
***  I.E. 1 TO 1 HEDGE
RESTRICT 1
# 2
# 1 1

*** TEST THE HYPOTHESIS THAT NO HEDGING IS POSSIBLE (SLOPE IS ZERO)
RESTRICT 1
# 2
# 1 0