An Optimal Pairs-Trading Rule
“When divergence is underway, i.e., one stock moves up while the other moves down, a pairs trade is entered which consists of a pair to short the outperforming stock and to long the underperforming one.”
AssetEquities
StrategyPairs trading
TechniqueMathematical derivation
ClaimExcess return
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
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The paper's neighbourhoodPairs trading and statistical arbitrage by year
FamilyPairs trading and statistical arbitrage93Momentum and trend following289Factor investing240Machine learning return prediction15318 more · 909
AssetEquities51
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