Econometrics: Multiple Equation Models eJournal, Vol 5, No. 1, January 09, 2012
10 Pages Posted: 31 Dec 2011 Last revised: 11 Jan 2012
Date Written: December 30, 2011
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: 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