Pairs trading profitability in the Finnish stock market: A comparison between three methods

Pairs trading is an algorithmic trading strategy that is based on the historical co-movement of two separate assets and trades are executed on the basis of degree of relative mispricing. The purpose of this study is to explore one new and alternative copula-based method for pairs trading. The objective is to find out whether the copula method generates more trading opportunities and higher profits than the more traditional distance and cointegration methods applied extensively in previous empirical studies. Methods are compared by selecting top five pairs from stocks of the large and medium-sized companies in the Finnish stock market. The research period includes years 2006-2015. All the methods are proven to be profitable and the Finnish stock market suitable for pairs trading. However, copula method doesn’t generate more trading opportunities or higher profits than the other methods. It seems that the limitations of the more traditional methods are not too restrictive for this particular sample data.

Return and volatility linkages between the S&P 500 and emerging stock markets in Eastern Europe

The aim of this thesis is to research mean return spillovers as well as volatility spillovers from the S&P 500 stock index in the USA to selected stock markets in the emerging economies in Eastern Europe between 2002 and 2014. The sample period has been divided into smaller subsamples, which enables taking different market conditions as well as the unification of the World’s capital markets during the financial crisis into account. Bivariate VAR(1) models are used to analyze the mean return spillovers while the volatility linkages are analyzed through the use of bivariate BEKK-GARCH(1,1) models. The results show both constant volatility pooling within the S&P 500 as well as some statistically significant spillovers of both return and volatility from the S&P 500 to the Eastern European emerging stock markets. Moreover, some of the results indicate that the volatility spillovers have increased as time has passed, indicating unification of global stock markets.

Pricing of Liquidity Risks in London Stock Exchange

This thesis aims to investigate pricing of liquidity risks in London Stock Exchange. Liquidity Adjusted Capital Asset Pricing Model i.e. LCAPM developed by Acharya and Pedersen (2005) is being applied to test the influence of various liquidity risks on stock returns in London Stock Exchange. The Liquidity Adjusted Capital Asset Pricing model provides a unified framework for the testing of liquidity risks. All the common stocks listed and delisted for the period of 2000 to 2014 are included in the data sample. The study has incorporated three different measures of liquidity – Percent Quoted Spread, Amihud (2002) and Turnover. The reason behind the application of three different liquidity measures is the multi-dimensional nature of liquidity. Firm fixed effects panel regression is applied for the estimation of LCAPM. However, the results are robust according to Fama-Macbeth regressions. The results of the study indicates that liquidity risks in the form of (i) level of liquidity, (ii) commonality in liquidity (iii) flight to liquidity, (iv) depressed wealth effect and market return as well as aggregate liquidity risk are priced at London Stock Exchange. However, the results are sensitive to the choice of liquidity measures.

Broad reduction and adoption in ring-billed gulls (Larus Delaworensis): the potential for inergenerational conflict

Patterns of intra-clutch egg size variation and intra-clutch hatch intervals in the Ring-billed gull (Larus delawarensis) were documented during the peak nesting period of two consecutive breeding seasons, at a colony near Port Colborne, Ontario. Egg size decreased with laying order; third laid eggs were significantly smaller than first laid eggs. Hatching of the third egg was delayed from that of first and second eggs. Intraclutch egg size differences established initial size disparities among chicks at hatch. Hatch intervals further exaggerated size disparities during the early post brood completion period. Competitive asymmetries among chicks were associated with increased mortality rates among third hatched chicks despite the lack of evidence of a sibling feeding hierarchy. Fledging success in 1987 was greater than in 1988. A "brood reduction strategy" appears to have enabled parents in 1987, to obtain an extra unit of reproductive fitness, while in 1988 parents were often unable to raise the entire brood and third chicks likely represented insurance reproductive value. Experimental broods (1988) were created in which hatch intervals were double those of natural intervals. The size disparities among chicks were significantly greater than in control broods, and the pattern of mortality among chicks suggested that first chicks benefited at a cost to second and third chicks. Parents of peak experimental broods achieved a fledging success rate similar to that of control broods. Characteristics of chick adoptions were also recorded. In each study year, 9 chicks abandoned their natal territories, 6 of which were adopted. Chicks consistently established themselves into broods where they were older than resident chicks. No direct evidence of cost to foster parents, or benefits to adopted chicks was obtained, although fledging success of adopted chicks was high.