This paper studies the ex-ante selective hedging strategies of crude oil futures contracts based on market state expectations and compares the hedging performances to the traditional minimum variance routine hedging strategies. The main advantage of the proposed method is that it achieves a trade-off between return and risk, rather than hedges risk at all costs. Specifically, we first use a multi-input Hidden Markov Model(HMM) to identify the market state, assess the market's herding impact, and then integrate the findings of identification and...