This paper examines the (in contemporary literature inconclusive) usefulness ofcointegration between stock prices as basis for a trading strategy. The primary contributionto previously used frameworks of the paper is the implementation and use of error correctionmodels for selection of stocks to trade on. Evaluation is done through simulated resultsrunning the algorithm on the sectors of the Standard and Poor’s 500 index in the years 2005through 2014. Results indicate that trading strategies of this nature may be very successfuleven in recent years given that the universe of tradeable stocks within a sector is sufficientlylarge. The application of error correction models improve average returns, though in a waynot originally anticipated.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-324593 |
| Date | January 2017 |
| Creators | Hansson, Olof, Aggeborn, Isak |
| Publisher | Uppsala universitet, Statistiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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