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Leveraged exchange trated funds’s emerging markets: A practical application of statistical arbitrage based on cointegration
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Leveraged exchange trated funds’s emerging markets: A practical application of statistical arbitrage based on cointegration
Journal
Journal of Applied Economic Sciences
Date Issued
2017
Author(s)
Ortiz Arango, Francisco
Facultad de Ciencias Económicas y Empresariales - CampCM
Urrutia-Martínez, Daniel Ulises
Flores-Méndez, Alejandro
Type
Resource Types::text::journal::journal article
URL
https://scripta.up.edu.mx/handle/123456789/1843
http://cesmaa.org/Docs/JAES%20Spring%20XII%201(47)_2017.pdf
Abstract
Pair Trading is a Neutral Market Strategy descendant of Statistical Arbitrage. Its objective is to identify pairs of assets whose historical prices or variations have high correlation between them. To attain this, pairs trading takes advantage of overvalued assets sales and purchases undervalued assets. To identify the goal pair, we performed back-testing using historical log returns (from December 31, 2008 through April 16, 2013). With the goal pair identified we run the daily strategy using historical adjusted at closed price data and historical log returns (from December 31, 2010 through September 11, 2015). Herein, we consider two inverse Exchange Trade Funds versus benchmark EEM (iShares MSCI Emerging Markets ETF) index. The objective of this work is to demonstrate that automated trading strategy built under the co-integration approach in moving windows of 60 and 180 days is able to beat a buy and hold strategy on the EEM benchmark. © 2017, ASERS Publishing House. All rights reserved.
Subjects
Cointegration
Exchange traded funds...
Mean reverse
Pair trading
Statistical arbitrage...
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Jul 26, 2024
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