Trading in the Presence of Cointegration

Alexander Galenko Elmira Popova Ivilina Popova
The following research presents new properties of cointegrated time series that serve as a basis for a novel high frequency trading strategy. The expected profit of this strategy is always positive. Its practical implementation is illustrated using the daily closing pricesof four world stock market indexes. 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 between 2001 to 2006. During that time the strategy significantly outperformed a simple buy-and-hold of the individual indexes.

Интересный способ торговли стат. арбитража  - практически без параметров, только размеры окон. В статье использован для торговли 4-мя индексами одновременно (AEX, CAC, DAX, FTSE). По модели определяются коэффициенты для приблежния к ожидаемому коинтеграционному вектору. По результатам дневного бэкстеста на разных периодах шарп от 0.9 до 1.5.