374 research outputs found
Pairs Trading: Performance of a Relative Value Arbitrage Rule
We test a Wall Street investment strategy known as pairs trading' with daily data over the period 1962 through 1997. Stocks are matched into pairs according to minimum distance in historical normalized price space. We test the profitability of several trading rules with six-month trading periods over the 1962-1997 period, and find average annualized excess returns of up to 12 percent for a number of self-financing portfolios of top pairs. Part of these profits may be due to market microstructure effects. Nevertheless, our historical trading profits exceed a conservative estimate of transaction costs through most of the period. We bootstrap random pairs in order to distinguish pairs trading from pure mean-reversion strategies. The bootstrap results suggest that the pairs' effect differs from previously documented mean reversion profits.
Uncovering the Internal Structure of the Indian Financial Market: Cross-correlation behavior in the NSE
The cross-correlations between price fluctuations of 201 frequently traded
stocks in the National Stock Exchange (NSE) of India are analyzed in this
paper. We use daily closing prices for the period 1996-2006, which coincides
with the period of rapid transformation of the market following liberalization.
The eigenvalue distribution of the cross-correlation matrix, , of
NSE is found to be similar to that of developed markets, such as the New York
Stock Exchange (NYSE): the majority of eigenvalues fall within the bounds
expected for a random matrix constructed from mutually uncorrelated time
series. Of the few largest eigenvalues that deviate from the bulk, the largest
is identified with market-wide movements. The intermediate eigenvalues that
occur between the largest and the bulk have been associated in NYSE with
specific business sectors with strong intra-group interactions. However, in the
Indian market, these deviating eigenvalues are comparatively very few and lie
much closer to the bulk. We propose that this is because of the relative lack
of distinct sector identity in the market, with the movement of stocks
dominantly influenced by the overall market trend. This is shown by explicit
construction of the interaction network in the market, first by generating the
minimum spanning tree from the unfiltered correlation matrix, and later, using
an improved method of generating the graph after filtering out the market mode
and random effects from the data. Both methods show, compared to developed
markets, the relative absence of clusters of co-moving stocks that belong to
the same business sector. This is consistent with the general belief that
emerging markets tend to be more correlated than developed markets.Comment: 15 pages, 8 figures, to appear in Proceedings of International
Workshop on "Econophysics & Sociophysics of Markets & Networks"
(Econophys-Kolkata III), Mar 12-15, 200
Warehouse design and planning: A mathematical programming approach
The dynamic nature of today's competitive markets compels organizations to an incessant reassessment in an effort to respond to continuous challenges. Therefore, warehouses as an important link in most supply chains, must be continually re-evaluated to ensure that they are consistent with both market's demands and management's strategies. A number of warehouse decision support models have been proposed in the literature but considerable difficulties in applying these models still remain, due to the large amount of information to be processed and to the large number of possible alternatives. In this paper we discuss a mathematical programming model aiming to support some warehouse management and inventory decisions. In particular a large mixed-integer nonlinear programming model (MINLP) is presented to capture the trade-offs among the different inventory and warehouse costs in order to achieve global optimal design satisfying throughput requirements.(undefined)info:eu-repo/semantics/publishedVersio
A Combined Signal Approach To Technical Analysis On The S&P 500
This paper examines the effectiveness of nine technical trading rules on the S&P 500 from January 1950 to March 2008 (14,646 daily observations). The annualized returns from each trading rule are compared to a naïve buy-and-hold strategy to determine profitability. Over the 59 year period, only the moving-average cross-over (1,200) and (5,150) trading rules were able to outperform the buy-and-hold trading strategy after adjusting for transaction costs. However, excess returns were generated by employing a Combined Signal Approach (CSA) on the individual trading rules. Statistical significance was confirmed through bootstrap simulations and robustness through sub-period analysis. 
Pension fund performance and costs: small is beautiful.
Abstract Using the CEM pension fund data set, we document the cost structure and performance of a large sample of US pension funds. To date, self-reporting biases and a deficiency of comprehensive return and cost data have severely hindered pension fund performance studies. The bias-free CEM dataset resolves these issues and provides detailed information on fund-specific returns, benchmarks and costs for all types of pension plans and equity mandates. We find that pension fund cost levels are substantially lower than mutual fund fees. The domestic equity investments of US pension funds tend to generate abnormal returns (after expenses and trading costs) close to zero or slightly positive, contrasting the average underperformance of mutual funds. However, small cap mandates of defined benefit funds have outperformed their benchmarks by about 3% a year. While larger scale brings costs advantages, liquidity limitations seem to allow only smaller funds, and especially small cap mandates, to outperform their benchmarks. JEL Classifications : G23, G11, G14 Acknowledgements Our thanks to Keith Ambachtsheer, CEM Benchmarking Inc. for providing the pension fun
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