• Corpus ID: 153825263

A Multi-factor Adaptive Statistical Arbitrage Model

@article{Zhang2014AMA,
  title={A Multi-factor Adaptive Statistical Arbitrage Model},
  author={Wenbin Zhang and Zhen Dai and Bindu Pan and Milan Djabirov},
  journal={arXiv: Portfolio Management},
  year={2014}
}
This paper examines the implementation of a statistical arbitrage trading strategy based on co-integration relationships where we discover candidate portfolios using multiple factors rather than just price data. The portfolio selection methodologies include K-means clustering, graphical lasso and a combination of the two. Our results show that clustering appears to yield better candidate portfolios on average than naively using graphical lasso over the entire equity pool. A hybrid approach of… 
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