On the Estimation of the Consumption-Wealth Ratio: Cointegrating Parameter Instability and its Implications for Stock Return Forecasting
Hahn and Lee (2001) study pairs trading and statistical arbitrage in equities. The abstract does not mention a benchmark, an out-of-sample test, transaction costs, multiple testing or the size of the universe.
“Although Lettau and Ludvigson (2001a) find that the estimated consumption-wealth ratio (CAY) is a strong predictor of aggregate stock returns, the instability of the cointegrating parameters suggests that the empirical applications of CAY are problematic.”
AssetEquities
StrategyPairs tradingmachine learning
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
Institutional-grade audit of this strategy.
£5 — Request the audit- Audit of the paper claims accounting for costs, luck, crises, originality, geography, etc.
- Reproduction code integratable into Bloomberg, IBKR, etc.
- Bias-free datasets for backtesting included
- Delivered in 2 working days
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
The family is counted across the whole universe. Asset, method and authors are counted inside the family.
| Similar papers | citation | same method | same asset | same authors | |
|---|---|---|---|---|---|
| Portfolio Selection with Return Predictability and Periodically Observable Predictive Variables by Liu and Huang | 2003 | ||||
| A Regime-Aware, Free-Boundary Framework for Statistical Arbitrage: Kalman-Filtered Synthetic Baskets, EGARCH Volatility, Markov Regime Detection, and Optimal Stopping via Hamilton-Jacobi-Bellman by Bektas | 2026 | ||||
| AN EMPIRICAL ASSESSMENT OF PAIRS TRADING USING ENSEMBLE Q-LEARNING by Rayaprolu | 2026 | ||||
| A Regime-Aware Hybrid Pairs Trading System with Sentiment-Driven Intelligence by Kolapwar et al. | 2026 | ||||
| Signature-Based Optimal Execution for Statistical Arbitrage with Path-Dependent Trading Signals by Morbelli et al. | 2026 |