Statistical arbitrage in South Africa

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.

Grantor dc:publisher.institution

Division of Actuarial Science

Year dc:date.issued

2014

Author dc:creator

• Duyvené de Wit, Jean-Jacques

Advisor dc:contributor.advisor

• Kotzé, Kevin

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/18603

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/18603