In this paper we show that pairs of stocks which have a true long run equilibrium (cointegration) yield a higher return than pairs of stocks that relies on a more spurious relationship (correlation) when applying Pairs Trading for a trading period from 31/12-09 to 25/6-14. We get an annual return for the cointegration portfolio of 4,15%, with a Sharpe-ratio of 0,87. For the correlated portfolio we get 2,08% and 0,45, respectively. The Sharpe-ratio for a buy-and-hold market index during the same period was 1,08.

This study investigates the degree of exchange rate pass-through to prices in different sectors for Turkish economy using Johansen Cointegration procedure. The study is based on quarterly data from 1994:1 to 2003:4. In this study it is concluded that the long-run exchange rate pass-through to overall wholesale prices for Turkey is very high and nearly complete. High pass-through degrees are also valid for different sub-sectors wholesale prices like private, public, manufacturing industry and energy. Moreover, it is detected that the prices set by public sector have higher exchange rate pass-through but longer adjustment period as compared to private sector prices.

This dissertation contains five essays in the field of time series econometrics. The main issue discussed is the lack of coherence between small sample and asymptotic inference. Frequently, in modern econometrics distributional results are strictly only valid for a hypothetical infinite sample. Studies show that the attained actual level of a test may be considerable different from the nominal significance level, and as a concequence, too many true null hypotheses will falsely be rejected. This leads, in the extension, to applied users that too often reject evidence in the data for theoretical predictions. In large, the thesis discusses how computer intensive methods may be used to adjust the test distribution, such that the actual significance level will coincide with the desired nominal level. The first two essays focus on how to improve testing for persistence in data, through a bootstrap procedure within a univariate framework. The remaining three essays are studies of multivariate time series models. The third essay considers the identification problem of the basic stationary vector autoregressive model, which is also the basic-line econometric specification for maximum likelihood cointegration analysis. In the fourth essay the multivariate framework is expanded to allow for components of different integrating order and in this setting the paper discusses how fractional cointegration affects the inference in maximum likelihood cointegration analysis. The fifth essay consider once again the bootstrap testing approach, now in a multivariate application, to correct inference on long-run relations in maximum likelihood cointegration analysis. / Diss. Stockholm : Handelshögsk.

Traditional macroeconometric models of the Australian economy estimate the behaviour of wage and price inflation separately, thereby ignoring the possibility that there is a contemporaneous relationship between these two variables. This thesis follows a recent trend emerging in other small open economies, such as the UK and Norway, which is to estimate the behaviour of wage and price inflation in a simultaneous-equations model. In order to capture the behaviour of the major variables which drive wages and prices, a complete model is constructed which embeds these important transmission channels. The model is developed in three stages. First, underpinned by a theoretical framework of a unionized economy with imperfect competition, the core wage- price system is developed whereby consumer prices and average weekly earnings are jointly estimated in a simultaneous-equations framework. Particular atten- tion is given to estimating two identified cointegrating relationships for wages and prices. These equations are interpreted as the long-run targets of workers and firms respectively and are embedded in a parsimonious system of short-run dynamics which drive wages and prices towards their long-run levels. Second, llie behaviour of llie main feedback variables driving llie wage-price system is modelled, with particular attention given to the unemployment rate. While several of the most recent models of unemployment show that the aggregate unemployment rate in Australia does indeed behave differently during periods of low and high unemployment, none can explain what drives the unemployment rate to increase at such a rapid rate and what contributes to its much slower decrease. Another central issue of this thesis, therefore, is to propose a rationale for this as yet unexplained phenomenon. The remaining behavioural variables in the model, including aggregate labour productivity, domestic output and the real exchange rate, are all estimated in a single-equation framework. Third, these equations are then combined with a number of important identi- ties and an interest-rate reaction function to close the model. Then, the impacts of several simulated economic scenarios on Australia's economic landscape are considered. Special emphasis is given to analysing the impact of a large nomi- nal wage shock. The outcomes from these simulated scenarios are pertinent to understanding the inflation process and have important implications for a small open economy like Australia with an explicit inflation target. Overall, the major result to emerge from this thesis is that there is significant statistical support for the hypothesis that wage and price inflation in Australia are jointly determined. This phenomenon has not yet been fully exploited in current macroeconometric models of the Australian economy. The modelling exercise also reveals that the Australian unemployment rate is linear in demand and labour productivity shocks, with nonlinear behaviour caused by real wage rigidity and generous unemployment benefits. Importantly, this simple model is able to simulate the behaviour of the Australian economy extremely well. The outcome from the policy scenarios is clear: both demand-side and supply-side shocks have real and nominal effects on the economy in the short- to medium- run, ceteris paribus. Moreover, a large nominal wage shock to the economy, which results in a real wage rise, will have no sustained effect on the level of domestic activity in the economy, the inflation rate or the real exchange rate. Unemployment is, however, pushed slightly above equilibrium in the short- to medium-run due to a sustained higher real wage level.

Thesis (M.Econ-Res.)--University of Wollongong, 2007. / Typescript. Includes bibliographical references: leaf 115-123.

Thesis (Ph. D.)--University of California, San Diego, 2004. / Vita. Includes bibliographical references (leaves 136-144).

Τις τελευταίες δεκαετίες η υψηλή μεταβλητότητα που παρατηρείται στις χρηματοοικονομικές μεταβλητές, έχει δημιουργήσει έντονη την ανάγκη για αποτελεσματική διαχείριση του κινδύνου. Τα παράγωγα χρηματοοικονομικά προϊόντα παρέχουν τα μέσα για αντιστάθμιση του κινδύνου. Προς αυτή την κατεύθυνση έχει κατασκευασθεί ένας δείκτης που αντιπροσωπεύει την τεκμαρτή μεταβλητότητα των παραγώγων χρηματοοικονομικών προϊόντων, ο δείκτης VIX. Σκοπός της εργασίας είναι η διερεύνηση της σχέσης του δείκτη VIX με την αγορά του S&P500 και η σχέση συνολοκλήρωσης τεκμαρτής και δεσμευμένης μεταβλητότητας του S&P500. / --

This thesis investigates the long- and short- run stability of Cointegrated dual share equity pairs on the Swedish Equity Market. Testing for a cointegrated relationship on each pair are executed for a 13 year period to establish the cointegrated pairs. The stability of each cointegrated pair is then estimated using a rolling two year period. An Arbitrage Trading strategy is applied to the cointegrated pairs for the following one year period. The long-run relationship of the pairs are found to be stable. The short-term relationship varies from pair to pair, where some pairs break their cointegrated relationship for some time periods. But generally, most pairs are stable over the short- term as well. The trading strategy generate the highest returns during volatile market conditions and underperforms during positive market conditions with low volatility. The Sharpe ratio is far better than the Index during the whole period.

Submitted by ARIEL TEIXEIRA (ateixeira@fgvmail.br) on 2014-03-14T15:38:35Z No. of bitstreams: 1 Pair trading in Bovespa with a quantitative approach cointegration, Ornstein-Uhlenbeck equation and Kelly criterion.pdf: 857529 bytes, checksum: d324d9458357fb950c816b5a8bfd11d2 (MD5) / Approved for entry into archive by Janete de Oliveira Feitosa (janete.feitosa@fgv.br) on 2014-03-14T16:29:51Z (GMT) No. of bitstreams: 1 Pair trading in Bovespa with a quantitative approach cointegration, Ornstein-Uhlenbeck equation and Kelly criterion.pdf: 857529 bytes, checksum: d324d9458357fb950c816b5a8bfd11d2 (MD5) / Approved for entry into archive by Maria Almeida (maria.socorro@fgv.br) on 2014-04-09T14:58:17Z (GMT) No. of bitstreams: 1 Pair trading in Bovespa with a quantitative approach cointegration, Ornstein-Uhlenbeck equation and Kelly criterion.pdf: 857529 bytes, checksum: d324d9458357fb950c816b5a8bfd11d2 (MD5) / Made available in DSpace on 2014-04-09T14:58:29Z (GMT). No. of bitstreams: 1 Pair trading in Bovespa with a quantitative approach cointegration, Ornstein-Uhlenbeck equation and Kelly criterion.pdf: 857529 bytes, checksum: d324d9458357fb950c816b5a8bfd11d2 (MD5) Previous issue date: 2014-02-17 / Pair trading is an old and well-known technique among traders. In this paper, we discuss an important element not commonly debated in Brazil: the cointegration between pairs, which would guarantee the spread stability. We run the Dickey-Fuller test to check cointegration, and then compare the results with non-cointegrated pairs. We found that the Sharpe ratio of cointegrated pairs is greater than the non-cointegrated. We also use the Ornstein-Uhlenbeck equation in order to calculate the half-life of the pairs. Again, this improves their performance. Last, we use the leverage suggested by Kelly Formula, once again improving the results.

Submitted by EDUARDO HINTERHOLZ (eduh17@gmail.com) on 2015-08-26T19:57:33Z No. of bitstreams: 1 DissertaçãoFinal.pdf: 1431279 bytes, checksum: dea2c0cdc148ed945cdfc8b33e86f668 (MD5) / Approved for entry into archive by Suzinei Teles Garcia Garcia (suzinei.garcia@fgv.br) on 2015-08-26T20:02:31Z (GMT) No. of bitstreams: 1 DissertaçãoFinal.pdf: 1431279 bytes, checksum: dea2c0cdc148ed945cdfc8b33e86f668 (MD5) / Made available in DSpace on 2015-08-27T13:12:19Z (GMT). No. of bitstreams: 1 DissertaçãoFinal.pdf: 1431279 bytes, checksum: dea2c0cdc148ed945cdfc8b33e86f668 (MD5) Previous issue date: 2015 / This work proposes a method to examine variations in the cointegration relation between preferred and common stocks in the Brazilian stock market via Markovian regime switches. It aims on contributing for future works in 'pairs trading' and, more specifically, to price discovery, given that, conditional on the state, the system is assumed stationary. This implies there exists a (conditional) moving average representation from which measures of 'information share' (IS) could be extracted. For identification purposes, the Markov error correction model is estimated within a Bayesian MCMC framework. Inference and capability of detecting regime changes are shown using a Montecarlo experiment. I also highlight the necessity of modeling financial effects of high frequency data for reliable inference. / Este trabalho propõe um método para examinar variações na relação cointegração de preços de ações preferenciais e ordinárias da bolsa brasileira através de mudanças de regime no sentido de Markov. Este modelo tem como objetivo contribuir tanto para futuros trabalhos em negociações de pares ('pairs trading') quanto, principalmente, para aplicação em descoberta de preços visto que, condicional nos estados, é pressuposta estacionariedade no sistema. Desta maneira seria possível a extração de medidas de 'parcela de informação' (IS) baseadas na representação de médias móveis de um modelo de correção de erros Markoviano, estimado através de um ferramental bayesiano do tipo MCMC por questões de identificação. A validade do modelo no sentido de capturar as variações de regime é demonstrada através de experimento de Montecarlo, bem como é evidenciada a necessidade da modelar não normalidades na distribuição dos dados de alta frequência visando inferência.