Cointegration and Deterministic Spread-Based Stock Pair Trading Strategy

Mehmet Horasanlı and Alper Özdamar
Additional contact information
Mehmet Horasanlı: İş Portföy Yönetimi A.Ş.
Alper Özdamar: Allianz

Journal of Finance Letters (Maliye ve Finans Yazıları), 2012, vol. 27, issue 94, 97-118

Abstract: This study investigates the profitability of an investment strategy known as “pairs trading” on selected stocks from Istanbul Stock Exchange National 100 index. The stock universe is narrowed due to liquidity issues and divided into groups such as banking, insurance etc. to ensure the existence of fundamental reasons for mean reversion. Trading rules are based on the long and short term spread between the selected stocks and a final filtering with respect to ADF statistic is conducted. Results indicate that our pairs trading strategy provides a superior performance to the index itself and ADF filtering makes the pair selection procedure more reliable.

Keywords: Pairs-trade; cointegration; statistical arbitrage; mean-reversion (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dergipark.org.tr/tr/download/article-file/724924 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:acc:malfin:v:27:y:2012:i:94:p:97-118

Access Statistics for this article

Journal of Finance Letters (Maliye ve Finans Yazıları) is currently edited by Süleyman Kale

More articles in Journal of Finance Letters (Maliye ve Finans Yazıları) from Maliye ve Finans Yazıları Yayıncılık Ltd. Şti.
Bibliographic data for series maintained by Süleyman Kale ().