Akademik Veri Yönetim Sistemi
Journal of Derivatives and Hedge Funds, cilt.18, sa.2, ss.113-126, 2012 (Scopus)
We implemented model-driven statistical arbitrage strategies in Turkish equities market. Trading signals are generated by optimized parameters of distance method. When the trade in signal is triggered by the model, market-neutral portfolio is created by long in the synthetic ETF, which is based on constrained least squares regression of selected Istanbul Stock Exchange stocks and short in Turkish Derivatives Exchange (Turkdex) index futures contract. We performed pairs trading strategy based on a comparative mean reversion of asset prices with daily data over the period February 2005 through July 2011 in Istanbul Stock Exchange (ISE) and Turkdex. We constructed a hypothetical ISE30 ETF Index on a daily basis in order to originate pairs trading strategy with Turkdex. Because of the leverage rule of (1-10) index futures contracts, we had to evaluate spot stock pairs formation with futures contracts pairs strategy. The results indicate that applied pairs strategy produced overall returns of 901 per cent during the investment period, whereas naive strategy (buy and hold ISE-30 index) return for the same period was 111 per cent. Similar outperformance was observed in the Sharpe and Sortino ratios. © 2012 Macmillan Publishers Ltd.