scholarly journals Composition of portfolios by pairs trading with volatility criteria in the Brazilian market,

2021 ◽  
Vol 32 (86) ◽  
pp. 273-284
Author(s):  
Raphael Silveira Guerra Cavalcanti ◽  
Joséte Florencio dos Santos ◽  
Ramon Rodrigues dos Santos ◽  
Anderson Góis M. da Cunha
Keyword(s):  
Stock Market ◽  
Cointegration Analysis ◽  
Superior Performance ◽  
Pairs Trading ◽  
Analysis Methodology ◽  
Market Index ◽  
Augmented Dickey Fuller ◽  
Trading Model ◽  
Market Indexes ◽  
New Evidence

ABSTRACT The objective of this study was to understand how the shares’ volatility affects the portfolios’ dynamics formed using the model of pairs trading in the Brazilian stock market. This article distinguished itself by bringing new evidence about the effects of volatility in the pairs trading model not covered by previous studies, expanding the sample size analyzed in the Brazilian stock market. The chosen theme’s relevance is that investors can use pairs trading or long-short models to build their portfolios. The use of cointegration concepts probabilistically contributes to portfolios’ formation weakly correlated to the market indexes with superior performance. This article impacts the area by contributing new evidence for better use of the model in the analysis of investments. From January 2016 to December 2018, the 90 most liquid assets of Bolsa, Brasil, Balcão (B3) were analyzed, totaling 5,927,400 possible pairs. The Augmented Dickey-Fuller test and subsequent backtesting of the pairs in the proposed period were used to evaluate the cointegration criteria. Statistical analysis was performed by parametric and non-parametric tests and Pearson and Spearman correlation analyses. The results found indicated that the formation of portfolios by pairs trading with dependent assets with the criterion of higher levels of volatility (20 periods) presented a superior performance. These findings can be justified by a better risk and return ratio for the portfolio, measured by the Sharpe Index of the returns obtained concerning the portfolio’s volatility, compared to a portfolio formation based on a random selection of the pairs. In addition, the results also showed a low correlation of returns concerning the market index. Therefore, the application of the statistical cointegration analysis methodology alone does not guarantee results that are different from the market average.

On the sensibility of the Pairs Trading strategy: the case of the FTS stock market index

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Ainhoa Fernández-Pérez ◽  
María de las Nieves López-García ◽  
José Pedro Ramos Requena
Keyword(s):  
Standard Deviation ◽  
Stock Market ◽  
Trading Strategy ◽  
Stock Market Index ◽  
Pairs Trading ◽  
Empirical Application ◽  
Statistical Arbitrage ◽  
Market Index ◽  
Standard Deviations ◽  
Using Data

In this paper we present a non-conventional statistical arbitrage technique based in varying the number of standard deviations used to carry the trading strategy. We will show how values of 1 and 1,2 in the standard deviation provide better results that the classic strategy of Gatev et al (2006). An empirical application is performance using data of the FST100 index during the period 2010 to June 2019.

Estimation of Price Volatility of Nifty 50 Index using ADF and GARCH (1, 1)

2021 ◽  
pp. 480-485
Keyword(s):  
Stock Market ◽  
Price Volatility ◽  
Research Area ◽  
Stock Market Index ◽  
Economic Sectors ◽  
Stock Market Returns ◽  
Market Index ◽  
Augmented Dickey Fuller ◽  
Portfolio Managers ◽  
Adf Test

Volatility is one of the critical variables to make an appropriate decision in investment. Volatility is a crucial research area in financial markets. So Portfolio managers, company treasurers, and risk arbitrageurs closely observe volatility trends resulting from changes in costs that affect their investment and decisions in risk management. The objective of the study was to examine the volatility of the Nifty 50 index based on the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. Daily observations (3125) from March 3, 2008, to March 3, 2020, of stock market returns were used for analysis, and it helped to provide the volatility patterns. Augmented Dickey fuller was used to estimate volatility using the GARCH (1,) model to test stationary. The results of the ADF test revealed that financial data was stationary. The result indicated that the performance of the NIFTY 50 stock market index was highly volatile, leading to an excellent opportunity for long-term investment in any of the 12 economic sectors listed in the NIFTY 50 index.

scholarly journals Exchange Rates And Equity Markets: Evidence From Some European Countries

2010 ◽  
Vol 26 (6) ◽  
Author(s):  
Oana Ariana Batori ◽  
Dimitrios Tsoukalas ◽  
Paolo Miranda
Keyword(s):  
Stock Market ◽  
Exchange Rates ◽  
Cointegration Analysis ◽  
Integrated System ◽  
Vector Autoregressive ◽  
Vector Error Correction ◽  
Vector Error ◽  
Daily Data ◽  
Causality Tests ◽  
Market Indexes

<p class="MsoNormal" style="text-align: justify; line-height: normal; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This paper employs cointegration analysis, vector error correction and vector autoregressive modeling along with Granger causality tests to examine the effect of exchange rates on the stock market indexes for a group of<span style="mso-spacerun: yes;">&nbsp; </span>European Union countries using daily data from 1999-2009. <span style="mso-spacerun: yes;">&nbsp;</span>The results suggest that the transmitting mechanism for the influence of the exchange rate in the stock market is foreign investment.<span style="mso-spacerun: yes;">&nbsp; </span>Evidence also highlights that there is no clear causality from stock market to exchange rates, or vice versa, for the direction of the causation, suggesting that exchange rates and stock markets operate as an integrated system continuously influencing each other.</span></span></p>

scholarly journals Developing a New Stock Index for Vietnam’s Securities Market

2014 ◽  
Vol 220 ◽  
pp. 60-78
Author(s):  
Huân Nguyễn Hữu
Keyword(s):  
Stock Market ◽  
Predictive Power ◽  
Securities Market ◽  
Stock Index ◽  
Stock Exchanges ◽  
Securities Markets ◽  
Stock Market Index ◽  
Market Index ◽  
Market Indexes ◽  
Research Show

Stock market index plays an important role as a measure of development of securities markets of a country or a region. Results of this empirical research show that in its 13 years of development, Vietnamese securities market indexes only had limited values because of their poor market representation and predictive power, implying the need to merge Hà Nội and HCMC stock exchanges. The research suggests a new set of stock market indexes to deal with shortcomings of existing indexes, thereby providing relevant entities with a new view on development of securities market in Vietnam.

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