Statistical arbitrage in South Africa

Master Thesis

2014

Permanent link to this Item
http://hdl.handle.net/11427/18603
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thesis_com_2014_duyvene_de_wit_jean_jacques.pdf (6.73 MB)
Authors
Duyvené de Wit, Jean-Jacques
Supervisors
Kotzé, Kevin
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University of Cape Town

Department
Division of Actuarial Science
Faculty
Faculty of Commerce
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Abstract
This study investigates the performance of a statistical arbitrage portfolio in the South African equity markets. A portfolio of liquid stock pairs that exhibit cointegration is traded for a ten year period between the years 2003 and 2013. Without transaction costs, the portfolio has an encouraging Sharpe ratio of 2.1. When realistic transaction costs are factored in, the Sharpe ratio drops to 0.43.The results underline the theoretical profitability of statistical arbitrage as a trading strategy and highlight the importance of transaction costs in a real-world setting.
Description

Includes bibliographical references.

Keywords
Mathematical Finance

Reference:

Duyvené de Wit, J. 2014. Statistical arbitrage in South Africa. University of Cape Town.

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