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Pairs Trading: an Extension to the CointegrationApproach: Can a cointegration approach based on low frequency data trading still beatthe market in contemporary years?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
2017 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper examines the (in contemporary literature inconclusive) usefulness ofcointegration between stock prices as basis for a trading strategy. The primary contributionto previously used frameworks of the paper is the implementation and use of error correctionmodels for selection of stocks to trade on. Evaluation is done through simulated resultsrunning the algorithm on the sectors of the Standard and Poor’s 500 index in the years 2005through 2014. Results indicate that trading strategies of this nature may be very successfuleven in recent years given that the universe of tradeable stocks within a sector is sufficientlylarge. The application of error correction models improve average returns, though in a waynot originally anticipated.

Place, publisher, year, edition, pages
2017. , 43 p.
Keyword [en]
Cointegration Error Correction Model Pairs Trading
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:uu:diva-324593OAI: oai:DiVA.org:uu-324593DiVA: diva2:1110563
Subject / course
Statistics
Educational program
Bachelor Programme in Business and Economics
Supervisors
Available from: 2017-06-16 Created: 2017-06-15 Last updated: 2017-06-16Bibliographically approved

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fulltext(906 kB)84 downloads
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Hansson, Olof
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CiteExportLink to record
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Citation style
  • apa
  • ieee
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  • vancouver
  • Other style
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Language
  • de-DE
  • en-GB
  • en-US
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  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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