Finding the Identical Twin

Econometrics: Multiple Equation Models eJournal, Vol 5, No. 1, January 09, 2012

10 Pages Posted: 31 Dec 2011 Last revised: 11 Jan 2012

Dr. Ashwin G. Modi Sr.

Hemchandracharya North Gujarat University

Dr.Jay Desai

B.K.School of Business Management, Gujarat University

Dr. Ashvin Ramchandra Dave

Pandit Deendayal Petroleum University

Kinjal Jay Desai

Corporate Solutions Group, SBI Life Insurance Co. Ltd.

Date Written: December 30, 2011

Abstract

In this paper we examine correlation and mean reverting behavior of Dow Jones Industrial Average, with ten stock markets from Asia, Europe and America. Along with correlation test, Augmented Dickey Fuller Test is conducted to test the mean reverting behavior of time series. We found that all the markets are positively correlated with DJIA. We also confirm that high degree of correlation does not result in mean reversion between two time series.

Keywords: Dow Jones, Augmented Dickey Fuller Test, Correlation, Pairs Trading, World Markets, Time Series, Portfolio Management, Hedging, Portfolio Balancing, Risk Management

Suggested Citation

Modi, Dr. Ashwin G. and Desai, Dr.Jay and Dave, Dr. Ashvin Ramchandra and Desai, Kinjal Jay, Finding the Identical Twin (December 30, 2011). Econometrics: Multiple Equation Models eJournal, Vol 5, No. 1, January 09, 2012 . Available at SSRN: https://ssrn.com/abstract=1977697 or http://dx.doi.org/10.2139/ssrn.1977697

Ashwin Govindbhai Modi Sr.

Hemchandracharya North Gujarat University ( email )

Patan 384265
India

HOME PAGE: http://www.ngu.ac.in

Jay Desai (Contact Author)

B.K.School of Business Management, Gujarat University ( email )

Navrangpura
Ahmedabad, Gujarat 380009
India

HOME PAGE: http://www.jaydesai.net

Dr. Ashvin Ramchandra Dave

Pandit Deendayal Petroleum University ( email )

Raisan
Gandhinagar
Gandhinagar, 380015
India
+91-79-23275237 (Phone)

Kinjal Jay Desai

Corporate Solutions Group, SBI Life Insurance Co. Ltd. ( email )

401, Rain Drops Building
Opp.Cargo Motors, C.G.RO
Ahmedabad, Gujarat 380015
India

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