Pairs trading: is it profitable in Amman Stock Exchange?
by Dima Waleed Hanna Alrabadi
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 7, No. 3, 2017

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.

Online publication date: Sun, 30-Jul-2017

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