Optimal statistical arbitrage trading of Berkshire Hathaway stock and its replicating portfolio
Fig 2
a: Buffett-factor model returns, b: five-factor model returns, c: Buffett-factor model returns and five-factor model returns for the sub-period (2008–2009). Fig 2A shows the returns of the replicating asset constructed by using the Buffett-factor model. Fig 2B shows the returns of the replicating asset constructed by using the five-factor model. We can find that the overall behavior patterns of the two replicating assets are similar to those of the original Berkshire A stock. Fig 2C overlays the information presented in Fig 2A and 2B in one plot using a shorter time frame, 2008–2009. This figure shows that the information presented in Fig 2A and 2B, which depict the returns of the replicating assets obtained from using the Buffett- and five-factor models are not identical to each other. In the figure, the maximum return of the Buffett-factor model is 7.2%; the minimum return is -0.068%. The maximum return of the five-factor model is 6.26%; the minimum return is -0.0733.