THE SECRET TO CASH THE PROFITS IN PAIR TRADING STRATEGIES: A CASE OF KSE FIRMS
Abstract
One of the profitable strategies in construction of portfolio is pair trading strategy. To capture the profitability through pair trading, co-integration approach is used in this study. The formation of pairs take place from three sectors textile, chemical and banking using the daily data from year 2011 to year 2019. Different parameterizations are used for trading system algorithm. Positive and significant returns are generated from co-integration approach. Further, positive risk adjusted returns are also be observed in all the three sectors. The results also validate the market neutrality, mean revision and EMH. Investors and fund managers can get positive risk adjusted returns while applying pair trading strategies at KSE.
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Copyright (c) 2020 Muhammad Khalid Sohail, Muzammal Ilyas Sindhu, Muhammad Imran
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