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On Statistical Arbitrage: Cointegration and Vector Error-Correction in the Energy Sector

This paper provides methods to select pairs potentially profitable within the frame of statistical arbitrage. We employ a cointegration approach on pairwise combinations of five large energy companies listed on the New York Stock Exchange for the period 27th September 2012 to 22nd April 2014. We find one cointegrated pair, for which we further investigate both short and long run dynamics. A vector-error correction model is constructed, supporting a long run relationship between the two stocks, which is also supported by the mean-reverting characteristic of a stationary linear combination of the stocks. Impulse response functions and variance decomposition are also studied to further describe the interrelation of the stocks, supporting a unidirectional causality between the stocks.

Identiferoai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-226012
Date January 2014
CreatorsNilsson, Oscar, Latim Okumu, Emmanuel
PublisherUppsala universitet, Statistiska institutionen, Uppsala universitet, Statistiska institutionen
Source SetsDiVA Archive at Upsalla University
LanguageEnglish
Detected LanguageEnglish
TypeStudent thesis, info:eu-repo/semantics/bachelorThesis, text
Formatapplication/pdf
Rightsinfo:eu-repo/semantics/openAccess

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