Evaluation of the performance of a pairs trading strategy of JSE listed firms
Date
2016
Authors
Naicker, Shreelin
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Abstract
A pairs trading strategy is a market neutral trading strategy that tries to
make a profit by making use of inefficiencies in financial markets. In the
equity pairs trading context, a market neutral strategy, is a strategy that
hedges against both market and sector risk. According to the efficient
market theory in its weak form, a pairs trading strategy should not
produce positive returns since the actual stock price is reflected in its past
trading data. The main objective of this paper is to examine the
performance and risk of an equity pairs trading strategy in an emerging
market context using daily, weekly and monthly prices on the
Johannesburg Securities Exchange over the period 1994 to 2014. A
bootstrap method is used determine whether returns from the strategy
can be attributed to skill rather than luck.
Description
A research report submitted to the Faculty of Commerce, Law and
Management, University of the Witwatersrand, in partial fulfilment of the
requirements for the degree of Master of Finance and investment.
Johannesburg, 2015
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Citation
Naicker, Shereen (2016) Evaluation of the performance of a pairs trading strategy of JSE listed firms, University of the Witwatersrand, <http://wiredspace.wits.ac.za/handle/10539/21506>