Fractional Cointegration of Voting and Non-Voting Shares
Loading...
Date
1998
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Universitätsbibliothek Dortmund
Abstract
Voting and non-voting shares of ten German companies are analyzed for fractional cointegration. It turns out that seven pairs of price series are fractionally cointegrated, which means that for each pair there is a linear combination of the two series that is a long-memory process. If two stocks are fractionally cointegrated, future returns of at least one of the stocks can be predicted by past prices. This contradicts the weak form of the efficient market hypothesis. A simple trading strategy is proposed and analyzed; it leads to considerable excess returns in two out-of-sample evaluations.
Description
Table of contents
Keywords
efficient market hypothesis, fractional cointegration, non-voting shares, preferred stocks, voting premium