Dynamic ETF Pairs Trading System. Evidence From Australia
This study evaluates the profitability of dynamic pairs trading strategies using a proposed 3-step pairs selection approach. We extend the pairs trading methodology employed by Miao (2014) to the…
SHOWING 1-10 OF 32 REFERENCES
A New Approach to Modeling and Estimation for Pairs Trading
Pairs trading is an speculative investment strategy based on relative mispricing between a pair of stocks. Essentially, the strategy involves choosing a pair of stocks that historically move…
Understanding the Profitability of Pairs Trading
This paper links uninformed demand shocks with the profits and risks of pairs trading. Usually employed by sophisticated investors, pairs trading is a relative value strategy that simultaneously buys…
Testing Market Efficiency Using Statistical Arbitrage with Applications to Momentum and Value Strategies
Evidence is found that momentum and value trading strategies constitute statistical arbitrage opportunities, despite controlling for transaction costs and the influence of small stocks, and their profitability does not appear to decline over time.
An Anatomy of Pairs Trading: The Role of Idiosyncratic News, Common Information and Liquidity
"Pairs trading" involves taking a bet that the price paths of two stocks that have historically moved together will converge again after any divergence. Consistent with the view that profits to pairs…
Loss protection in pairs trading through minimum profit bounds: A cointegration approach
- EconomicsAdv. Decis. Sci.
This paper uses cointegration principles to develop a procedure that embeds a minimum profit condition within a pairs trading strategy and shows that, at reasonable minimum profit levels, the protocol does not greatly reduce trade numbers or absolute profits relative to an unprotected trading strategy.
Some properties of time series data and their use in econometric model specification
‘Pairs Trading’ is an investment strategy used by many Hedge Funds. Consider two similar stocks which trade at some spread. If the spread widens short the high stock and buy the low stock. As the…
Better Hedge Ratios for Spread Trading
This note discusses the calculation of hedge ratios for spread trading. It suggests that using total least squares (TLS) is superior to the normally-used technique of ordinary least squares (OLS).…
High-Frequency Equity Pairs Trading: Transaction Costs, Speed of Execution, and Patterns in Returns
- EconomicsThe Journal of Trading
This article examines the characteristics of high-frequency pairs trading using a sample of FTSE100 constituent stocks for the period January to December 2007. The authors show that the excess…