n Investment Analysts Journal - Pairs trading on the Johannesburg Stock Exchange
|Article Title||Pairs trading on the Johannesburg Stock Exchange|
|© Publisher:||Taylor & Francis|
|Journal||Investment Analysts Journal|
|Affiliations||1 North-West University, 2 North-West University and 3 North-West University|
|Publication Date||Nov 2013|
|Pages||13 - 26|
ISI Social Science
Pairs trading strategies aim to profit from temporary deviations in some underlying relationship between the prices of two stocks. The trader takes appropriate long and short positions in the two stocks and waits for their prices to revert back to the underlying relationship or even to deviate in the opposite direction from the current deviation, at which time the trader may exit at a profit. We formulate formal trading rules that implement pairs trading strategies and discuss their profitability and risk by means of back-testing on stocks listed on the Johannesburg Stock Exchange (JSE).
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