Pairs trading: is it profitable in Amman Stock Exchange?

Dima Waleed Hanna Alrabadi

Afro-Asian Journal of Finance and Accounting, 2017, vol. 7, issue 3, 242-254

Abstract: This study investigates the profitability of pairs trading strategy in Amman Stock Exchange (ASE) using daily data over the period (2009-2013). Specifically, five pairs of stocks are selected based on three criteria; simple correlation analysis, the closeness measure of Gatev et al. (2006) and cointegration analysis. The results indicate that the pairs trading strategy achieves an annual rate of return of 22.5%, which is fully explained by both the capital asset pricing model and the Fama and French (1993) three-factor model. These findings are vital to investors, speculators and academicians.

Keywords: Amman Stock Exchange; ASE; arbitrage; closeness; cointegration analysis; investment strategy; pairs trading. (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:7:y:2017:i:3:p:242-254

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