Testing the Cointegration Hypothesis and its Consequences on the Investment Strategy. An empirical study on Central-Eastern Europe
Testing the Cointegration Hypothesis and its Consequences on the Investment Strategy. An empirical study on Central-Eastern Europe
Author(s): Alexandra DumencuSubject(s): Economy
Published by: Alma Mater & Universitatea »Babes Bolyai« Cluj - Facultatea de St. Economice si Gestiunea Afacerilor
Keywords: cointegration; stock market; investment; portfolio
Summary/Abstract: Based on the theory of cointegration introduced by Engle and Granger and on the methodology developed by Johansen, this paper investigates long term cointegration between Central-Eastern European stock markets and the consequences of using Pairs Trading strategy as an investment approach. The stock price indexes of Romania, Hungary and Czech Republic are used, with daily data spanning from 4 January 1999 to 30 December 2009. The findings of this article outline optimum portfolios build using long and short positions of financial assets.
Journal: Review of Economic Studies and Research Virgil Madgearu
- Issue Year: V/2012
- Issue No: 1
- Page Range: 45-58
- Page Count: 14
- Language: English
- Content File-PDF
