Testing Cointegration for Czech Stock Market

Testování kointegrace na českém akciovém trhu

Tran Van Quang

Acta Oeconomica Pragensia, 2007, vol. 2007, issue 4, 17-31

Abstract: Based on cointegration analysis of daily data of the most liquid Czech stock from September 1, 1997 to February 28, 2007, a long run equilibrium relationship was revealed to exist between prices of stocks of Komerční banka (KB), České energetické závody (CEZ) and Unipetrol (UNPE). Prices time series of these stocks have a unit root and are cointegrated. There is a unique combination of these stocks which is mean reverting and can be used to achieve statistical arbitrage. However, in order to exploit this possibility, a number of challenges need to be dealt with. Investors should take into account the speed of the mean reversion rate, the size of the variation and the stability of the out of sample behaviour of this combination of these stocks.

Keywords: unit root; cointegration; Czech stocks prices time series; mean reverting (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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DOI: 10.18267/j.aop.70

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