The Long – Short Strategy Based On Cointegration Concept
AbstractThis paper presents a strategy of asset allocation based on the concept of cointegration. The method used can be applied on non-stationary data and has the advantage of using the whole set of information given by the financial variables. The cointegration approach is used for the construction of portfolios that can accurately follow an index. The results obtained are used in order to construct a long-short strategy. The steps followed are: First, two new indices are constructed to mimic the evolution of the original index but one has a higher yield at the end of the period (“plus benchmark”) and the other has a lower yield (“minus benchmark”). The concept of cointegration is then used to build portfolios that follow as well as possible the new indices. The “plus portfolios” and “minus portfolios” constructed this way are combined in a long-short strategy that has a low correlation with the market returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Romanian-American University in its journal Romanian Economic and Business Review.
Volume (Year): 5 (2010)
Issue (Month): 1 (March)
portfolio; cointegration; index tracking; stocks; long-short strategy;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alex Tabusca).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.