Pair trading in Bovespa with a quantitative approach: cointegration, Ornstein-Uhlenbeck equation and Kelly criterion.
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 result...
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| Formato: | tesis de maestría |
| Estado: | Versión publicada |
| Fecha de publicación: | 2014 |
| País: | Brasil |
| Recursos: | Fundação Getulio Vargas (FGV) |
| Repositorio: | Repositório Institucional do FGV (FGV Repositório Digital) |
| Idioma: | inglés |
| OAI Identifier: | oai:repositorio.fgv.br:10438/11605 |
| Acesso em linha: | https://hdl.handle.net/10438/11605 |
| Access Level: | acceso abierto |
| Palavra-chave: | Cointegration Ornstein-Uhlenbeck equation Kelly criterion Matemática Cointegração Operações com pares (Finanças) Ações (Finanças) |
| Resumo: | 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. |
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