{"id":{"repo_id":"cape-town","oai_identifier":"oai:open.uct.ac.za:11427/8532"},"canonical_url":"https://search.dev.ndltd.org/etd/cape-town/oai:open.uct.ac.za:11427/8532","repository":{"repo_id":"cape-town","name":"University of Cape Town","base_url":"https://open.uct.ac.za/oai/request"},"display":{"title":"Pairs trading: a copula approach","abstract":"Pairs trading is an arbitrage strategy that involves identifying a pair of stocks known to move together historically and trading on them when relative mispricing occurs. The strategy involves shorting the overvalued stock and simultaneously going long on the undervalued stock and closing the positions once the prices have returned to fair values. The cointegration method and the distance method are the most common techniques used in pairs trading strategy. However under these methods, the measure of divergence between the stocks or the spread is assumed to be symmetrically distributed about the mean zero. In addition, the spread is assumed to be a stationary time series (cointegration method) or mean-reverting (distance method). These assumptions are the main drawbacks of these methods and may lead to missed and/or inaccurate trading signals. The purpose of this dissertation is to explore an alternative approach to pairs trading by use of copulas. This dissertation aims to investigate if copulas can improve the profitability of pairs trading. To achieve this aim, results of pairs trading by use of copulas are compared against those of cointegration and distance methods.","abstract_html":"Pairs trading is an arbitrage strategy that involves identifying a pair of stocks known to move together historically and trading on them when relative mispricing occurs. The strategy involves shorting the overvalued stock and simultaneously going long on the undervalued stock and closing the positions once the prices have returned to fair values. The cointegration method and the distance method are the most common techniques used in pairs trading strategy. However under these methods, the measure of divergence between the stocks or the spread is assumed to be symmetrically distributed about the mean zero. In addition, the spread is assumed to be a stationary time series (cointegration method) or mean-reverting (distance method). These assumptions are the main drawbacks of these methods and may lead to missed and/or inaccurate trading signals. The purpose of this dissertation is to explore an alternative approach to pairs trading by use of copulas. This dissertation aims to investigate if copulas can improve the profitability of pairs trading. To achieve this aim, results of pairs trading by use of copulas are compared against those of cointegration and distance methods.","abstract_has_math":false,"creators":["Augustine, Cecilia"],"institution":"Division of Actuarial Science","degree_name":null,"degree_level":null,"degree_discipline":null,"degree_department":null,"school":null,"contributors":[],"advisors":["Bosman, Petrus"],"committee_chairs":[],"committee_members":[],"year":2014,"date_issued":"2014","date_published":"2014","updated_at":"2026-07-24T01:34:19Z","subjects":[],"languages":["eng"],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"http://hdl.handle.net/11427/8532","outbound_label":"Handle","outbound_source":"dc:identifier.uri"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor.advisor","label":"Advisor","values":["Bosman, Petrus"]},{"key":"dc:creator","label":"Author","values":["Augustine, Cecilia"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.accessioned","label":"Dc Date Accessioned","values":["2014-10-17T10:09:59Z"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2014-10-17T10:09:59Z"]},{"key":"dc:date.issued","label":"Date","values":["2014"]},{"key":"dc:publisher.department","label":"Dc Publisher Department","values":["Division of Actuarial Science"]},{"key":"dc:publisher.institution","label":"Dc Publisher Institution","values":["University of Cape Town"]},{"key":"dc:type","label":"Dc Type","values":["Master Thesis"]},{"key":"dc:type.qualificationlevel","label":"Dc Type Qualificationlevel","values":["Masters"]},{"key":"dc:type.qualificationname","label":"Dc Type Qualificationname","values":["MPhil"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language.iso","label":"Language (ISO)","values":["eng"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.uri","label":"Identifier URI","values":["http://hdl.handle.net/11427/8532"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description","label":"Description","values":["Includes bibliographical references."]},{"key":"dc:description.abstract","label":"Abstract","values":["Pairs trading is an arbitrage strategy that involves identifying a pair of stocks known to move together historically and trading on them when relative mispricing occurs. The strategy involves shorting the overvalued stock and simultaneously going long on the undervalued stock and closing the positions once the prices have returned to fair values. The cointegration method and the distance method are the most common techniques used in pairs trading strategy. However under these methods, the measure of divergence between the stocks or the spread is assumed to be symmetrically distributed about the mean zero. In addition, the spread is assumed to be a stationary time series (cointegration method) or mean-reverting (distance method). These assumptions are the main drawbacks of these methods and may lead to missed and/or inaccurate trading signals. The purpose of this dissertation is to explore an alternative approach to pairs trading by use of copulas. This dissertation aims to investigate if copulas can improve the profitability of pairs trading. To achieve this aim, results of pairs trading by use of copulas are compared against those of cointegration and distance methods."]},{"key":"dc:title","label":"Title","values":["Pairs trading: a copula approach"]}]}],"canonical_facts":{"dc:contributor.advisor":["Bosman, Petrus"],"dc:creator":["Augustine, Cecilia"],"dc:date.accessioned":["2014-10-17T10:09:59Z"],"dc:date.available":["2014-10-17T10:09:59Z"],"dc:date.issued":["2014"],"dc:description":["Includes bibliographical references."],"dc:description.abstract":["Pairs trading is an arbitrage strategy that involves identifying a pair of stocks known to move together historically and trading on them when relative mispricing occurs. The strategy involves shorting the overvalued stock and simultaneously going long on the undervalued stock and closing the positions once the prices have returned to fair values. The cointegration method and the distance method are the most common techniques used in pairs trading strategy. However under these methods, the measure of divergence between the stocks or the spread is assumed to be symmetrically distributed about the mean zero. In addition, the spread is assumed to be a stationary time series (cointegration method) or mean-reverting (distance method). These assumptions are the main drawbacks of these methods and may lead to missed and/or inaccurate trading signals. The purpose of this dissertation is to explore an alternative approach to pairs trading by use of copulas. This dissertation aims to investigate if copulas can improve the profitability of pairs trading. To achieve this aim, results of pairs trading by use of copulas are compared against those of cointegration and distance methods."],"dc:identifier.uri":["http://hdl.handle.net/11427/8532"],"dc:language.iso":["eng"],"dc:publisher.department":["Division of Actuarial Science"],"dc:publisher.institution":["University of Cape Town"],"dc:title":["Pairs trading: a copula approach"],"dc:type":["Master Thesis"],"dc:type.qualificationlevel":["Masters"],"dc:type.qualificationname":["MPhil"]},"updated_at":"2026-07-24T01:34:19Z"}