Some Notes on the Formation of a Pair in Pairs Trading

Ramos-Requena, José Pedro; Segovia, Juan Evangelista Trinidad; Sánchez-Granero, M.A.

doi:10.3390/math8030348

Cited by 16 publications

(8 citation statements)

References 43 publications

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“…To calculate the value of b, we will use the method described by Ramos-Requena et al [55], called minimizing distance.…”

Section: Methodsmentioning

confidence: 99%

“…Finally, all of these contributions are focused on the methodology for pairs selection. In a different line, Ramos-Requena et al [55] introduced different models to calculate the amount of money that must be allocated to each stock. The authors showed these new alternatives perform better than the usual Equal Weight method.…”

Section: Fundamentals Of Pairs Tradingmentioning

confidence: 99%

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Statistical Arbitrage in Emerging Markets: A Global Test of Efficiency

et al. 2021

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In this paper, we use a statistical arbitrage method in different developed and emerging countries to show that the profitability of the strategy is based on the degree of market efficiency. We will show that our strategy is more profitable in emerging ones and in periods with greater uncertainty. Our method consists of a Pairs Trading strategy based on the concept of mean reversion by selecting pair series that have the lower Hurst exponent. We also show that the pair selection with the lowest Hurst exponent has sense, and the lower the Hurst exponent of the pair series, the better the profitability that is obtained. The sample is composed by the 50 largest capitalized companies of 39 countries, and the performance of the strategy is analyzed during the period from 1 January 2000 to 10 April 2020. For a deeper analysis, this period is divided into three different subperiods and different portfolios are also considered.

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“…To calculate the value of b, we will use the method described by Ramos-Requena et al [55], called minimizing distance.…”

Section: Methodsmentioning

confidence: 99%

Section: Fundamentals Of Pairs Tradingmentioning

confidence: 99%

Statistical Arbitrage in Emerging Markets: A Global Test of Efficiency

et al. 2021

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“…Once the 50 stocks with the lowest volatility have been selected, we select the pairs from that 50-stock universe. In order to do that, we follow the method defined by Ramos-Requena et al [31] (see also [45]). Given a pair candidate of stocks A and B, we define the pair series as s(b)(t) � p A (t) −bp B (t), where p A (t) is the logarithm of the price of stock A at time t, p B (t) is the logarithm of the price of stock B at time t and b is the quantity invested in stock B for each dollar invested in stock A.…”

Section: Pairs Trading Strategymentioning

confidence: 99%

A Cooperative Dynamic Approach to Pairs Trading

et al. 2021

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Based on recent works on stocks comovement, Pairs Trading’s strategy is enhanced by reducing the stock universe to the stocks with the lower volatility on a given date. From this universe of low volatility stocks, pairs are selected by looking for pairs whose series present a high degree of antipersistence. Finally, a “reversion to the mean” strategy is applied to these pairs. It is shown that, with this approach to Pairs Trading, positive results can be obtained for stock from the Nasdaq stock exchange, mainly during bull markets and low volatility periods.

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“…To calculate the value of b, we will use a method introduced in [56,68] that is based on the volatility of stock returns. This factor is calculated as:…”

Section: Pairs Trading Strategymentioning

confidence: 99%

Exploring Arbitrage Strategies in Corporate Social Responsibility Companies

et al. 2020

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Today, Socially Responsible financial investment has taken on particular importance. Investors normally select their most profitable investments, but over the years they have appreciated that companies develop Socially Responsible policies. Financial indices have also created Socially Responsible versions. In this paper, we run a statistical arbitrage technique known as Pairs Trading using stocks of the FTSE4GOOD Socially Responsible Index. Different strategies will be tested to demonstrate that there are no significant differences between the performance of the portfolio composed by Corporate Social Responsibility (CSR) stocks and those composed by ordinary stocks.

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Some Notes on the Formation of a Pair in Pairs Trading

Cited by 16 publications

References 43 publications

Statistical Arbitrage in Emerging Markets: A Global Test of Efficiency

Statistical Arbitrage in Emerging Markets: A Global Test of Efficiency

A Cooperative Dynamic Approach to Pairs Trading

Exploring Arbitrage Strategies in Corporate Social Responsibility Companies

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