We back-test a statistical arbitrage strategy, pairs trading, over the ten year
period 01.01.2003 – 31.12.2012 at the Oslo Stock Exchange. We construct an
unbiased dataset, where stocks are matched into pairs using a cointegration
approach and traded according to a set of pre specified rules. The strategy
yields consistent negative returns independent of parameterisation of entryand
exit thresholds. Our findings are in line with previous literature, where we
support the view that absence of profits is not necessarily due to increased
activity among hedge funds, but rather changes in fundamental factors
governing the relationships between stocks
