Mean Reversion Based on Autocorrelation: A Comparison Using the S&P 100 Constituent Stocks and the 100 Most Liquid ETFs

摘要: The motivation for this paper is to show that even a simple strategy based on conditional autocorrelation can give traders an edge. Our mean reversion takes the position in pair consisting of Exchange traded funds (ETFs) or shares normalized previous period's return and actual autocorrelation. We conclude ETFs are more suitable financial instrument our than stocks. Yet, another finding significantly improved when we use half-daily (open-close-open-...) sampling frequency as opposed daily one (close-close). Information ratios after accounting transaction costs (TC) range between 1.4 2.8 ETF pairs at frequency.