PAIRS TRADING AND VALUE INVESTING STRATEGIES

Kamphol Panyagometh
NIDA Business School, Bangkok, Thailand
ABSTRACT
This research is the study using Stock Exchange of Thailand (SET) information from 2002-
2012 in order to test for the application of Pairs Trading and Value Investing strategies on
creation of investment portfolio by investing in low price to earnings ratio (P/E) and price to book
ratio (P/B) stocks and short-selling of high P/E and P/B stocks, whether this strategy can generate
higher returns. The study results indicated that the investment portfolio applying the Pairs
Trading strategy could significantly generate higher returns than sole investment portfolio in low
PER and PBV stocks for either short or long investment period. However, if the risk was also
taken into consideration, the Pairs Trading investment portfolio could still generate higher returns
than the compared investment portfolio under risk comparison perspective.