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Issue 5(1), October 2010 -- Paper Abstracts
Girard  (p. 9-22)
Cooper (p. 23-32)
Kunz-Osborne (p. 33-41)
Coulmas-Law (p.42-46)
Stasio (p. 47-56)
Albert-Valette-Florence (p.57-63)
Zhang-Rauch (p. 64-70)
Alam-Yasin (p. 71-78)
Mattare-Monahan-Shah (p. 79-94)
Nonis-Hudson-Hunt (p. 95-106)



JOURNAL OF APPLIED BUSINESS AND ECONOMICS

Exploiting Long Term Price Dependencies for Trading Strategies

Author(s): Alexander Galenko, Elmira Popova, Ivilina Popova

Citation: Alexander Galenko, Elmira Popova, Ivilina Popova, (2011) "Exploiting Long Term Price Dependencies for Trading Strategies," Journal of Applied Business and Economics, Vol. 12, Iss. 6, pp. 11 - 25

Article Type: Research paper

Publisher: North American Business Press

Abstract:

The following research uses properties of cointegrated time series that serve as a basis for a daily trading strategy. Its practical implementation is illustrated using the daily closing prices of four world stock market indices. In-sample (as well as out-of-sample) results show that the long-term dependencies of financial time series can be profitably exploited in a variant of “pairs trading” strategy. This paper includes an extended empirical study that shows the strategy's performance as a function of its parameters. The backtests presented show the daily profit-and-loss results for the period 2001 to 2006. During that time, the strategy significantly outperformed a simple buy-and-hold of the individual indices.