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Pairs trading: is it profitable in Amman Stock Exchange?

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  • Dima Waleed Hanna Alrabadi

Abstract

This study investigates the profitability of pairs trading strategy in Amman Stock Exchange (ASE) using daily data over the period (2009-2013). Specifically, five pairs of stocks are selected based on three criteria; simple correlation analysis, the closeness measure of Gatev et al. (2006) and cointegration analysis. The results indicate that the pairs trading strategy achieves an annual rate of return of 22.5%, which is fully explained by both the capital asset pricing model and the Fama and French (1993) three-factor model. These findings are vital to investors, speculators and academicians.

Suggested Citation

  • Dima Waleed Hanna Alrabadi, 2017. "Pairs trading: is it profitable in Amman Stock Exchange?," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 7(3), pages 242-254.
    • Handle: RePEc:ids:afasfa:v:7:y:2017:i:3:p:242-254
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