Designing and Implementation of Pair Trading Strategy Software in Iran Stock Market

Document Type : Research Paper

Authors

1 shahed university

2 university of science and culture

Abstract

The purpose of this research is to design software and evaluate the implementation of the pair trading strategy in the stock market of Iran. In order to review this strategy, two companies - National Development Group (Bank) and Insurance Industry (Insurance) in 2013 - were selected and their stock prices were extracted from Rahavard Novin Software. Before using the above mentioned two stocks, their capability of getting paired were evaluated using correlation, reliability and long-term tests to make sure that they can be paired all respects regarded. After the design of pair trading strategy software, its implementation capability for two companies, named above, were investigated. The results showed that this strategy is applicable and its signals can be used for trading.  Also finding of this research proved that this strategy is more applicable for stock pairs which have similar price movements, more periodic volatilities (weekly, monthly) and the feature of mean reversion. The more the price of trading pairs and periodic volatilities are correlated, the more implementation capability of the strategy and its profitability will be. For designing this software, C# programming language was used. This software is designed for the first time in Iran and it is easy to use and user friendly.
 

Keywords

References

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Financial Management Strategy
Volume 3, Issue 4 - Serial Number 11
August 2016
Pages 107-123

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History

  • Receive Date: 05 October 2014
  • Revise Date: 22 August 2016
  • Accept Date: 22 August 2016

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