Market neutral statistical arbitrage strategy by factor models in Tehran stock exchange

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MOKHATAB RAFIEI FARIMAH; Nourbakhsh Kamyar

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Paper Information

Journal: FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES) Year:2018 | Volume:11 | Issue:39 Page(s): 83-93

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Information Journal Paper

Title

Market neutral statistical arbitrage strategy by factor models in Tehran stock exchange

Author(s)

MOKHATAB RAFIEI FARIMAH | Nourbakhsh Kamyar | Issue Writer Certificate

Keywords

Statistical ArbitrageQ2

Market neutralQ2

Ornstein-uhlenbeckQ2

Mean revertingQ2

principal component analysisQ2

long positionQ2

Abstract

forecasting price movements is a challenging issue. So different Statistical Arbitrage strategies are devised to trade in exchanges. Some of these strategies are Market neutral. Market neutral strategies are neutral to market movements and make profits in any situation. These strategies use long and short positions at the same time and this makes them unusable in exchanges like Tehran stock exchange that only long position is available. Purpose of this paper is devising a Market neutral Statistical Arbitrage strategy which can be used in Tehran stock exchange. In devising this strategy we use principal component analysis to estimate market movements and calculate stocks idiosyncratic movements. To forecasting stocks idiosyncratic movements, which have Mean reverting properties, we use Ornstein-uhlenbeck model. The strategy made 35% average annual return by considering transaction cost which is more than Tehran exchange index in the study period. results show this method is a good framework for devising Statistical Arbitrage strategies.

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APA: Copy

MOKHATAB RAFIEI, FARIMAH, & Nourbakhsh, Kamyar. (2018). Market neutral statistical arbitrage strategy by factor models in Tehran stock exchange. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), 11(39 ), 83-93. SID. https://sid.ir/paper/200320/en

Vancouver: Copy

MOKHATAB RAFIEI FARIMAH, Nourbakhsh Kamyar. Market neutral statistical arbitrage strategy by factor models in Tehran stock exchange. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES)[Internet]. 2018;11(39 ):83-93. Available from: https://sid.ir/paper/200320/en

IEEE: Copy

FARIMAH MOKHATAB RAFIEI, and Kamyar Nourbakhsh, “Market neutral statistical arbitrage strategy by factor models in Tehran stock exchange,” FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), vol. 11, no. 39 , pp. 83–93, 2018, [Online]. Available: https://sid.ir/paper/200320/en

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