Evaluation of pairs trading strategy at the Brazilian financial market

Pairs trading is a popular trading strategy that tries to take advantage of market inefficiencies in order to obtain profit. The idea is simple: find two stocks that move together and take long/short positions when they diverge abnormally, hoping that the prices will converge in the future. From the academic point of view of weak market efficiency theory, pairs trading strategy shouldn’t present positive performance since, according to it, the actual price of a stock reflects its past trading data, including historical prices. This leaves us with a question, does pairs trading strategy presents positive performance for the Brazilian market? The main objective of this research is to verify the performance and risk of pairs trading in the Brazilian financial market for different frequencies of the database, daily, weekly and monthly prices for the same time period. The main conclusion of this simulation is that pairs trading strategy was a profitable and market neutral strategy at the Brazilian Market. Such profitability was consistent over a region of the strategy’s parameters. The best results were found for the highest frequency (daily), which is an intuitive result

Evaluation of pairs trading strategy at the Brazilian financial market

Pairs trading is a popular trading strategy that tries to take advantage of market inefficiencies in order to obtain profit. The idea is simple: find two stocks that move together and take long/short positions when they diverge abnormally, hoping that the prices will converge in the future. From the academic point of view of weak market efficiency theory, pairs trading strategy shouldn’t present positive performance since, according to it, the actual price of a stock reflects its past trading data, including historical prices. This leaves us with a question, does pairs trading strategy presents positive performance for the Brazilian market? The main objective of this research is to verify the performance and risk of pairs trading in the Brazilian financial market for different frequencies of the database, daily, weekly and monthly prices for the same time period. The main conclusion of this simulation is that pairs trading strategy was a profitable and market neutral strategy at the Brazilian Market. Such profitability was consistent over a region of the strategy’s parameters. The best results were found for the highest frequency (daily), which is an intuitive result.pairs trading, quantitative strategy, asset allocation

M of a kind: A Multivariate Approach at Pairs Trading

Pairs trading is a popular trading strategy that tries to take advantage of market inefficiencies in order to obtain profit. Such approach, on its classical formulation, uses information of only two stocks (a stock and its pairs) in the formation of the trading signals. The objective of this paper is to suggest a multivariate version of pairs trading, which will try to create an artificial pair for a particular stock based on the information of m assets, instead of just one. The performance of three different versions of the multivariate approach was assessed for the Brazilian financial market using daily data from 2000 to 2006 for 57 assets. Considering realistic transaction costs, the analysis of performance was conducted with the calculation of raw and excessive returns, beta and alpha calculation, and the use of bootstrap methods for comparing performance indicators against portfolios build with random trading signals. The main conclusion of the paper is that the proposed version was able to beat the benchmark returns and random portfolios for the majority of the parameters. The performance is also found superior to the classic version of the strategy, Perlin (2006b). Another information derived from the research is that the proposed strategy picks up volatility from the data, that is, the annualized standard deviations of the returns are quite high. But, such event is “paid” by high positive returns at the long and short positions. This result is also supported by the positive annualized sharpe ratios presented by the strategy. Regarding systematic risk, the results showed that the proposed strategy does have a statistically significant beta, but it isn’t high in value, meaning that the relationship between return and risk for the trading rules is still attractive.pairs trading, asset allocation, quantitative strategy

Effect of electron-phonon interaction on the shift and attenuation of optical phonons

Using the Boltzmann equation for electrons in metals, we show that the optical phonons soften and have a dispersion due to screening in agreement with the results reported recently [M. Reizer, Phys. Rev. B {\bf 61}, 40 (2000)]. Additional phonon damping and frequency shift arise when the electron--phonon interaction is properly included.Comment: 4 pages, late

GOTCHA Password Hackers!

We introduce GOTCHAs (Generating panOptic Turing Tests to Tell Computers and Humans Apart) as a way of preventing automated offline dictionary attacks against user selected passwords. A GOTCHA is a randomized puzzle generation protocol, which involves interaction between a computer and a human. Informally, a GOTCHA should satisfy two key properties: (1) The puzzles are easy for the human to solve. (2) The puzzles are hard for a computer to solve even if it has the random bits used by the computer to generate the final puzzle --- unlike a CAPTCHA. Our main theorem demonstrates that GOTCHAs can be used to mitigate the threat of offline dictionary attacks against passwords by ensuring that a password cracker must receive constant feedback from a human being while mounting an attack. Finally, we provide a candidate construction of GOTCHAs based on Inkblot images. Our construction relies on the usability assumption that users can recognize the phrases that they originally used to describe each Inkblot image --- a much weaker usability assumption than previous password systems based on Inkblots which required users to recall their phrase exactly. We conduct a user study to evaluate the usability of our GOTCHA construction. We also generate a GOTCHA challenge where we encourage artificial intelligence and security researchers to try to crack several passwords protected with our scheme.Comment: 2013 ACM Workshop on Artificial Intelligence and Security (AISec

M of a kind: A Multivariate Approach at Pairs Trading

Pairs trading is a popular trading strategy that tries to take advantage of market inefficiencies in order to obtain profit. Such approach, on its classical formulation, uses information of only two stocks (a stock and its pairs) in the formation of the trading signals. The objective of this paper is to suggest a multivariate version of pairs trading, which will try to create an artificial pair for a particular stock based on the information of m assets, instead of just one. The performance of three different versions of the multivariate approach was assessed for the Brazilian financial market using daily data from 2000 to 2006 for 57 assets. Considering realistic transaction costs, the analysis of performance was conducted with the calculation of raw and excessive returns, beta and alpha calculation, and the use of bootstrap methods for comparing performance indicators against portfolios build with random trading signals. The main conclusion of the paper is that the proposed version was able to beat the benchmark returns and random portfolios for the majority of the parameters. The performance is also found superior to the classic version of the strategy, Perlin (2006b). Another information derived from the research is that the proposed strategy picks up volatility from the data, that is, the annualized standard deviations of the returns are quite high. But, such event is “paid” by high positive returns at the long and short positions. This result is also supported by the positive annualized sharpe ratios presented by the strategy. Regarding systematic risk, the results showed that the proposed strategy does have a statistically significant beta, but it isn’t high in value, meaning that the relationship between return and risk for the trading rules is still attractive

Estimation of Parameters in DNA Mixture Analysis

In Cowell et al. (2007), a Bayesian network for analysis of mixed traces of DNA was presented using gamma distributions for modelling peak sizes in the electropherogram. It was demonstrated that the analysis was sensitive to the choice of a variance factor and hence this should be adapted to any new trace analysed. In the present paper we discuss how the variance parameter can be estimated by maximum likelihood to achieve this. The unknown proportions of DNA from each contributor can similarly be estimated by maximum likelihood jointly with the variance parameter. Furthermore we discuss how to incorporate prior knowledge about the parameters in a Bayesian analysis. The proposed estimation methods are illustrated through a few examples of applications for calculating evidential value in casework and for mixture deconvolution

Evaluation of pairs trading strategy at the Brazilian financial market

Pairs trading is a popular trading strategy that tries to take advantage of market inefficiencies in order to obtain profit. The idea is simple: find two stocks that move together and take long/short positions when they diverge abnormally, hoping that the prices will converge in the future. From the academic point of view of weak market efficiency theory, pairs trading strategy shouldn’t present positive performance since, according to it, the actual price of a stock reflects its past trading data, including historical prices. This leaves us with a question, does pairs trading strategy presents positive performance for the Brazilian market? The main objective of this research is to verify the performance and risk of pairs trading in the Brazilian financial market for different frequencies of the database, daily, weekly and monthly prices for the same time period. The main conclusion of this simulation is that pairs trading strategy was a profitable and market neutral strategy at the Brazilian Market. Such profitability was consistent over a region of the strategy’s parameters. The best results were found for the highest frequency (daily), which is an intuitive result

Free-space and underwater GHz data transmission using AlGaInN laser diode technology

Laser diodes fabricated from the AlGaInN material system is an emerging technology for defence and security applications; in particular for free space laser communication. Conventional underwater communication is done acoustically with very slow data rates, short reach, and vulnurable for interception. AlGaInN blue-green laser diode technology allows the possibility of both airbourne links and underwater telecom that operate at very fast data rates (GHz), long reach (100’s of metres underwater) and can also be quantum encrypted. The latest developments in AlGaInN laser diode technology are reviewed for defence and security applications. The AlGaInN material system allows for laser diodes to be fabricated over a very wide range of wavelengths from u.v., ~380nm, to the visible ~530nm, by tuning the indium content of the laser GaInN quantum well. Ridge waveguide laser diode structures are fabricated to achieve single mode operation with optical powers of <100mW. Visible light communications at high frequency (up to 2.5 Gbit/s) using a directly modulated 422nm Galliumnitride (GaN) blue laser diode is reported in free-space and underwate