Pairs Trading, Technical Analysis and Data Snooping: Mean Reversion vs. Momentum

Press/Media: Expert Comment

Description

This article examines the performance of technical rules applied to the commodity arbitrage (pairs-trading) investment strategy using daily data from 1990 to 2016. Adopting the false discovery rate method to control for data snooping bias and exercising 18,412 technical trading rules, significant predictability and excess profitability are observed. An out-of-sample analysis is performed to cross-validate the results in different sub-periods. The main finding is that whilst the performance of pairs-trading based on technical analysis exhibits a downward trend over the sample period, the opportunity for significant pairs-trading excess profitability remains. 
Period12 Jun 2018

Media contributions

1

Media contributions

  • TitleGlobal commodities - Applied Research Digest
    Degree of recognitionInternational
    Media name/outletJ.P. Morgan Center for Commodities
    Media typePrint
    CountryUnited States
    Date12/06/18
    DescriptionThe Global Commodities Applied Research Digest (GCARD) is produced by the J.P. Morgan Center for Commodities (JPMCC) at the University of Colorado Denver Business School. The University of Colorado Denver Business School is led by Dr. Rohan Christie-David, Ph.D., Dean and Professor of Finance. The JPMCC’s Research Director is Dr. Jian Yang, Ph.D., CFA, who is also the J.P. Morgan Endowed Research Chair and Professor of Finance and Risk Management.
    Producer/AuthorUniversity of Colorado Denver Business School
    URLwww.jpmcc-gcard.com/wp-content/uploads/2018/05/GCARD-Summer-2018.pdf
    PersonsAthanasios Pantelous

Keywords

  • commodity arbitrage
  • financial econometrics
  • investment strategy
  • mean reversion
  • momentum