Cointegration with a Time Trend and Pairs Trading Strategy: Empirical Study on the S&P 500 Future and Spot Index Prices

被引：0
|
作者：
Puspaningrum, Heni [1 ]
Lin, Yan-Xia [2 ]
Gulati, Chandra [2 ]
机构：
[1] Australian Taxat Off, Canberra, ACT 2600, Australia
[2] Univ Wollongong, Natl Inst Appl Stat, Res Australia Sch Math & Appl Stat, Wollongong, NSW 2500, Australia
来源：
INTERNATIONAL JOURNAL OF APPLIED MATHEMATICS & STATISTICS | 2014年 / 52卷 / 07期
关键词：
Cointegration; pairs trading; S&P 500 Future Contract; spot index price;
D O I：
暂无
中图分类号：
O29 [应用数学];
学科分类号：
070104 ;
摘要：
The efficiency and relationship between future and spot index prices has been investigated in literature by using different approaches. In this paper, the efficiency and relationship between the log future prices and the log spot prices is investigated for each contract based on cointegration model with a time trend. A new pairs trading strategy for stock prices cointegrated with time trend is proposed in this paper. Formulas used to evaluate the trading strategy are derived and the necessary conditions for making profit out of selected pairs of assets are discussed. S&P500 future contracts prices of Mar98, Jun98 and Sep98 as well as their corresponding spot index prices are considered in this paper. Our empirical studies show that the strategy proposed in this paper works very well and produces very significant high return for those selected pairs. The average return per trade for all periods and all those pairs are above 10%.
引用
收藏
页码：8 / 22
页数：15
相关论文
共 36 条
  • [21] Do investors choose trade-size according to liquidity, empirical evidence from the S&P 500 index future market
    Wu, Liang
    Yan, Xin
    Fu, Zhiming
    Zhang, Rui
    [J]. FINANCE RESEARCH LETTERS, 2019, 28 : 275 - 280
  • [22] A fuzzy set approach for generalized CRR model: An empirical analysis of S&P 500 index options
    Lee C.F.
    Tzeng G.-H.
    Wang S.-Y.
    [J]. Review of Quantitative Finance and Accounting, 2005, 25 (3) : 255 - 275
  • [23] A multi-horizon comparison of density forecasts for the S&P 500 using index returns and option prices
    Shackleton, Mark B.
    Taylor, Stephen J.
    Yu, Peng
    [J]. JOURNAL OF BANKING & FINANCE, 2010, 34 (11) : 2678 - 2693
  • [24] The effect of technological diversification on organizational performance: An empirical study of S&P 500 manufacturing firms
    Lin, Chinho
    Chang, Chia-Chi
    [J]. TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE, 2015, 90 : 575 - 586
  • [25] Stock price response to S&P 500 index inclusions: Do options listings and options trading volume matter?
    Chen, Yangyang
    Koutsantony, Constantine
    Truong, Cameron
    Veeraraghavan, Madhu
    [J]. JOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEY, 2013, 23 : 379 - 401
  • [26] Comments on "A multi-horizon comparison of density forecasts for the S&P 500 using index returns and option prices"
    Angeles Carnero, M.
    [J]. INTERNATIONAL JOURNAL OF FORECASTING, 2012, 28 (01) : 36 - 38
  • [27] The empirical linkages among market returns, return volatility, and trading volume: Evidence from the S&P 500 VIX Futures
    Kao, Yu-Sheng
    Chuang, Hwei-Lin
    Ku, Yu-Cheng
    [J]. NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE, 2020, 54
  • [28] Pricing and hedging S&P 500 index options with hermite polynomial approximation: Empirical tests of Madan and Milne's model
    Ane, T
    [J]. JOURNAL OF FUTURES MARKETS, 1999, 19 (07) : 735 - 758
  • [29] Parameter estimation for time-fractional Black-Scholes equation with S&P 500 index option
    An, Xingyu
    Wang, Qingxia
    Liu, Fawang
    Anh, Vo V.
    Turner, Ian W.
    [J]. NUMERICAL ALGORITHMS, 2024, 95 (01) : 1 - 30
  • [30] Determining the investors' strategy during the COVID-19 crisis based on the S&P 500 stock index1
    Pekar, Juraj
    Brezina, Ivan
    Reiff, Marian
    [J]. STRATEGIC MANAGEMENT, 2022,
1234