Factor analysis in the stock market: An application to statistical arbitrage

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Although being very profitable in the past years, the contrarian strategy, that tries to exploit the reversion of the stock prices after an overreaction of the new available information, had decline in the past years. To boost the profitability of that specific strategy, I tried to divide the assets of Eurostoxx 600 by some firm specific factors. The results of such improvement were not clear, since the new strategy beat the benchmark in some periods, but none systematically achieved better results in all the sample periods.