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On Statistical Arbitrage: Cointegration and Vector Error-Correction in the Energy Sector
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
2014 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

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.

Place, publisher, year, edition, pages
2014.
Keyword [en]
Mean-reversion, VAR, VECM, Impulse Response, Cointegration
National Category
Social Sciences
Identifiers
URN: urn:nbn:se:uu:diva-226012OAI: oai:DiVA.org:uu-226012DiVA: diva2:723351
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Available from: 2014-06-13 Created: 2014-06-10 Last updated: 2014-06-13Bibliographically approved

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On Statistical Arbitrage: Cointegration and Vector Error-Correction in the Energy Sector(856 kB)458 downloads
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Citation style
  • apa
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Language
  • de-DE
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  • nn-NB
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  • Other locale
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Output format
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