| dc.contributor.author | Hanson, Thomas Alan | |
| dc.description.abstract | This study proposes two new cointegration tests that employ rank-based and least absolute
deviation techniques to create a robust version of the Engle-Granger cointegration test.
Critical values are generated through a Monte Carlo simulation over a range of error
distributions, and the performance of the tests is then compared against the Engle-Granger
and Johansen tests. The robust procedures underperform slightly for normally distributed
error terms but outperform for fatter-tailed distributions. This characteristic suggests the
robust tests are more appropriate for many applications where departures from normality
are common. One particular example discussed here is statistical arbitrage, a stock trading
strategy based on cointegration and mean reversion. In a simple example, the rank-based
procedure produces additional profits over the Engle-Granger procedure. | en_US |
| dc.publisher | North Dakota State University | en_US |
| dc.rights | NDSU policy 190.6.2 | en_US |
| dc.title | Robust Tests for Cointegration with Application to Statistical Arbitrage Trading Strategies | en_US |
| dc.type | Master's Paper | en_US |
| dc.date.accessioned | 2024-03-08T19:03:54Z | |
| dc.date.available | 2024-03-08T19:03:54Z | |
| dc.date.issued | 2010 | |
| dc.identifier.uri | https://hdl.handle.net/10365/33719 | |
| dc.subject.lcsh | Cointegration. | en_US |
| dc.subject.lcsh | Finance -- Statistical methods. | en_US |
| dc.subject.lcsh | Pairs trading. | en_US |
| dc.rights.uri | https://www.ndsu.edu/fileadmin/policy/190.pdf | en_US |
| ndsu.degree | Master of Science (MS) | en_US |
| ndsu.college | Science and Mathematics | en_US |
| ndsu.department | Statistics | en_US |
| ndsu.program | Statistics | en_US |
| ndsu.advisor | Magel, Rhonda | |
