The Profitability of Pairs Trading in an Emerging  Market Setting: Evidence from the Istanbul Stock Exchange

Muslumov, Alovsat; Yüksel, Aslı; Yüksel, Sadettin

The Profitability of Pairs Trading in an Emerging Market Setting: Evidence from the Istanbul Stock Exchange

Empirical Economics Letters, cilt.8, sa.5, ss.1-6, 2009 (Hakemli Dergi)

Yayın Türü: Makale / Tam Makale
Cilt numarası: 8 Sayı: 5
Basım Tarihi: 2009
Dergi Adı: Empirical Economics Letters
Derginin Tarandığı İndeksler: EconLit
Sayfa Sayıları: ss.1-6
TED Üniversitesi Adresli: Hayır

Özet

This study measures the performance of the pairs trading strategy in an emerging stock market setting, using the methodology of Gatev et al. (2006). Distancebased pairs trading methodology gives an average excess return of 5.4 % for the top 20 best pairs portfolios. Although statistically significant, these results for the selffinancing portfolios lack economic significance considering transaction and shortselling costs.