An Empirical Evaluation of Pairs Trading in The Swedish Stock Market
(2014) NEKP02 20141Department of Economics
- Abstract
- This thesis offers a study on the performance of two different pairs trading approaches,
the Distance Method and the Stochastic Spread Method implemented on the Swedish
stock market for the period 2005-03-01 to 2014-03-06. The thesis also expands in the
existing literature on the stochastic spread approach to pairs trading by proposing
a pair selection method and an alternative way of generating trading signals that is
applicable to this pairs trading method. The performance of these pairs trading methods
are evaluated in terms of the Sharpe ratio (w.r.t. a broad market index benchmark
portfolio) of the returns generated by the portfolios that are being constructed on the
basis of the trading signals that are generated from these... (More) - This thesis offers a study on the performance of two different pairs trading approaches,
the Distance Method and the Stochastic Spread Method implemented on the Swedish
stock market for the period 2005-03-01 to 2014-03-06. The thesis also expands in the
existing literature on the stochastic spread approach to pairs trading by proposing
a pair selection method and an alternative way of generating trading signals that is
applicable to this pairs trading method. The performance of these pairs trading methods
are evaluated in terms of the Sharpe ratio (w.r.t. a broad market index benchmark
portfolio) of the returns generated by the portfolios that are being constructed on the
basis of the trading signals that are generated from these pairs trading methods. The
results from this study suggest that the portfolios created by the two pairs trading
methods are likely to be able to deliver a better risk-return profile compared to a
comparable self financing portfolio that is driven by a broad market index. The results
also suggest that performance of these pairs trading methods has improved over time. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/4689676
- author
- Goodwin, Dominice LU and Stefanovski, Marjan LU
- supervisor
-
- Karl Larsson LU
- organization
- course
- NEKP02 20141
- year
- 2014
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Pairs trading, stochastic spread, minimum distance method
- language
- English
- id
- 4689676
- date added to LUP
- 2014-09-29 09:20:54
- date last changed
- 2014-09-29 09:20:54
@misc{4689676, abstract = {{This thesis offers a study on the performance of two different pairs trading approaches, the Distance Method and the Stochastic Spread Method implemented on the Swedish stock market for the period 2005-03-01 to 2014-03-06. The thesis also expands in the existing literature on the stochastic spread approach to pairs trading by proposing a pair selection method and an alternative way of generating trading signals that is applicable to this pairs trading method. The performance of these pairs trading methods are evaluated in terms of the Sharpe ratio (w.r.t. a broad market index benchmark portfolio) of the returns generated by the portfolios that are being constructed on the basis of the trading signals that are generated from these pairs trading methods. The results from this study suggest that the portfolios created by the two pairs trading methods are likely to be able to deliver a better risk-return profile compared to a comparable self financing portfolio that is driven by a broad market index. The results also suggest that performance of these pairs trading methods has improved over time.}}, author = {{Goodwin, Dominice and Stefanovski, Marjan}}, language = {{eng}}, note = {{Student Paper}}, title = {{An Empirical Evaluation of Pairs Trading in The Swedish Stock Market}}, year = {{2014}}, }