Detail práce

Pairs Trading at the Prague Stock Exchange

Autor: Bc. Alice Nušlová
Rok: 2014 - letní
Vedoucí: doc. PhDr. Ladislav Krištoufek Ph.D.
Konzultant:
Typ práce: Bakalářská
Jazyk: Anglicky
Stránky: 77
Ocenění: Pochvala děkana Fakulty sociálních věd za vynikající výkon u státních zkoušek a za vynikající bakalářskou práci.
Odkaz: https://is.cuni.cz/webapps/zzp/detail/124893/
Abstrakt: Since its birth in the 1980s, pairs trading has become a widely used strategy for
making profits among hedge funds and institutional investors. This technique identifies pairs of
securities whose historical prices show long-run relationship, and takes advantage of their shortterm
relative mispricing. Profit is generated due to correcting behavior of security prices as they
converge towards equilibrium value of their spread. The aim of this thesis is to compare two
traditional approaches to pairs trading: cointegration and sum of squared deviations between
normalized historical returns, known as distance criterion, within the Prague Stock Exchange
equity market. We further investigate whether the two methods, so commonly employed in the
US equity market, can be applied with similar success in the PSE. Our results reveal that the
strategy using distance criterion outperforms the method of cointegration in nearly every aspect
considered. Nevertheless, its returns are not statistically different from zero, and in other measures
the return distribution lags behind the one found in the US equity market.We conclude
that with the form of trading we present here the PSE is not a suitable stock market for pairs
trading technique.

Partneři

ČSOB
Deloitte
McKinsey & Company

Sponzoři

CRIF