On the Market-Neutrality of Optimal Pairs-Trading Strategies
“Our new findings lead to a sharp well-posedness condition which is, surprisingly, also the necessary and sufficient condition for the optimal investment to be market-neutral (i.e. having offsetting long/short positions in the stocks).”
AssetEquities
StrategyPairs trading
TechniqueMathematical derivation
Long/shortLong-short
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
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