Norwegian equities mean reversion : statistical arbitrage as a source of views in the Black-Litterman Model
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- Master Thesis 
A trading strategy incorporating s-scores and conditional mean returns in the BlackLitterman model is backtested over a 13-year period, 01.01.2005-29.12.2017, on the OBX index at the Oslo Stock Exchange. Estimating the trading signals using different techniques, and conducting a constrained optimisation, daily NOK-neutral long-short active portfolio weights are computed. In combination with the benchmark weights, the strategy is found to yield substantial profits gross and net of costs, but statistical evidence in support of a superior strategy hypothesis is lacking, i.e. the results are with a high probability a product of randomness. Seemingly, the strategy seems to benefit from volatility, outperforming the benchmark during the financial crisis, to then underperform in the low volatility years, 2016 and 2017. Additionally, with the high concentration of Energy companies in the chosen benchmark, the possibilities to make profitable trades in other sectors are capped, as seen by the low percentage share of strong trading signals becoming active positions within these sectors, and the poor performance of non-Energy sector-based portfolios. This thesis finds some support for previous research, in that high volatility regimes are linked to better performance and which sectors are fitting for a mean-reversion strategy.