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Author: Koronidis, Georgios
Κορωνίδης, Γιώργος
Title: Pairs trading in forex markets: a test of the cointegration approach with the EUR/USD and GBP/USD currency pairs.
Date Issued: 2013
Department: Διατμηματικό Πρόγραμμα Μεταπτυχιακών Σπουδών στη Διοίκηση Επιχειρήσεων
Supervisor: Papanastasiou, John
Παπαναστασίου, Ιωάννης
Abstract: It is well known that pairs trading strategies are used in substantial level in the hedge fund world. At the current paper, we chose to implement one the classic pairs trading strategy, the Engle and Granger cointegration method in the world of forex, the biggest market nowadays, with daily average volume over 4 trillion dollars. Our candidates at this cointegration test were the EUR/USD and the GBP/USD currency pairs, two major pairs that constitutes by the currencies of three of the most important economies all over the world. Before the core test of cointegration, the reader will be “met” with the fx market history, its current special characteristics, as well as the important factors that, according to the author, make it a non-efficient market (at least most of the times), a fact that created the incentive to test the cointegration strategy as a possible profitable speculation or even hedging method. After this point, the author analyses his two preliminary tests, the fundamental and the scanning methods, the results of whom show important evidence for a possible cointegration occurrence between the two currency pairs. The Engle and Grander test procedure that follows however, shows that the cointegration between the two major pairs does not exist, at least at a 5% level of confidence. Finally, the author makes a reference to the summaries of the test, while also argues about the great need for further research at forex markets in order to be found possible candidates for a profitable implementation of the cointegration pairs trading strategy.
Keywords: Cointegration
Pairs trading
Information: Διπλωματική εργασία--Πανεπιστήμιο Μακεδονίας, Θεσσαλονίκη, 2013.
Appears in Collections:ΔΠΜΣ Διοίκηση Επιχειρήσεων (M)

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