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    A daily trading strategy in the ETN space

    Thukral, Lovjit and Diavatopoulos, D. and Geman, Hélyette and Wright, C. (2013) A daily trading strategy in the ETN space. The Journal of Trading 8 (3), pp. 57-67. ISSN 1559-3967.

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    Abstract

    This article investigates whether the weekly trading strategy in the ETN space reported by Diavatopoulos et al. [forthcoming] may be profitably deployed as a daily strategy. Replicating their strategy on a daily basis, we report the following findings: 1) Mispricing is prevalent among ETNs on a daily basis. We enter into 451 trades over our 295-week period, using a mispricing threshold of 5% and requiring a minimum average daily volume of 20,000 shares. 2) Total returns to our strategy are significantly higher than the S&P 500 and also considerably higher than the returns to the weekly strategy. Our strategy generated total returns reaching as high as 276%, depending on our minimum daily trading volume requirements and mispricing thresholds. In contrast, the S&P 500 returned only 3.70% over this same period, while the weekly strategy generated returns reaching as high as 114%. 3) Similar to the weekly strategy, most of the trades and profits from the daily strategy come from the short side of our portfolio. 4) The daily strategy results in strikingly different returns than the weekly strategy in the lower mispricing thresholds. The weekly strategy was highly unprofitable at low mispricing thresholds; however, the daily strategy generated impressive total returns at mispricing thresholds as low as 0.50%.

    Metadata

    Item Type: Article
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centres and Institutes: Commodities Finance Centre
    Depositing User: Sarah Hall
    Date Deposited: 14 Apr 2014 10:25
    Last Modified: 07 Dec 2016 15:31
    URI: https://eprints.bbk.ac.uk/id/eprint/9574

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