A simplified approach to pairs trading
Tags: SECURITIES; FINANCE; CORRELATION (Statistics)
Related Articles
- Correlation Jumps. Fong, Wai Mun // Journal of Applied Finance;Spring/Summer2003, Vol. 13 Issue 1, p29
It is widely believed that financial markets are more highly correlated in times of high volatility. However, the usual practice of inferring changes in correlations by conditioning on "high" and "low" volatility sub-samples is both arbitrary and exposed to selection bias (Boyer, Gibson, and...
- An Abundance. Evensky, Harold // Journal of Financial Planning;Oct2007, Vol. 20 Issue 10, p38
The author discusses insights he has gleaned from reading papers in the field of investment research. A low price-to-sales ratio is a consistent predictor of above-average future returns. Correlations among different assets in a portfolio may not be good indicators of diversification. Differing...
- Portfolio Serial Correlation and Nonsynchronous Trading. Perry, Philip R. // Journal of Financial & Quantitative Analysis;Dec85, Vol. 20 Issue 4, p517
Common stock portfolios of large, heavily traded firms exhibit daily first-order serial correlation in excess of what would be expected, given the individual security coefficients. Further, this correlation rises as the number of securities in the portfolio increases. The direct implication of...
- Changing of guard for leading strategies. Olsen, Kevin // Pensions & Investments;2/20/2012, Vol. 40 Issue 4, p15
The article reports that long term bond strategies have performed well as compared with long government bond strategies. It offers brief information on long government bond portfolios and mentions that it has highest median return among bond strategies. It also mentions that there is a...
- Pricing European and American Derivatives under a Jump-Diffusion Process: A Bivariate Tree Approach. Hilliard, Jimmy E.; Schwartz, Adam // Journal of Financial & Quantitative Analysis;Sep2005, Vol. 40 Issue 3, p671
We develop a straightforward procedure to price derivatives by a bivariate tree when the underlying process is a jump-diffusion. Probabilities and jump sizes are derived by matching higher order moments or cumulants. We give comparisons with other published results along with convergence proofs...
- The Impact of the Day of the Week on IPO Return Autocorrelation and Cross-Correlation. Higgins, Eric James; Howton, Shelly W.; Perfect, Steven B. // Quarterly Journal of Business & Economics;Winter2000, Vol. 39 Issue 1, p57
Two anomalies that generate continuing interest are the weekend effect and the underperformance of IPOs. Perfect and Peterson (1997) find that IPO returns are negative only on Monday and Tuesday, suggesting a related explanation for these two anomalies. We extend the work of Perfect and Peterson...
- Borsa Performans Oranlari ve Diger Finansal Oranlar Arasindaki Iliskinin Kanonik Korelasyon Analizi ile Incelenmesi. �z�omak, M. Suphi; G�nd�z, Murat // Journal of Graduate School of Social Sciences;Jun2012, Vol. 16 Issue 1, p453
Canonical correlation analysis (CCA), examines the structure of relation between two sets of variable, where each set consist of a lot of variables. CCA is expressed as the most general and the most complex relationship analysis. Although there isn't necessity in this method, one of the variable...
- Intermarket analysis: What works today. Ruggiero, Jr., Murray A. // Futures: News, Analysis & Strategies for Futures, Options & Deri;Feb2006, Vol. 35 Issue 3, p54
The article presents information on the intermarket analysis in trading, with emphasis on the relationship between Treasury bonds and the S&P 500 index. Statistics on the performance of the trading systems in the previous years are given. Pearson correlation is used to explain the relationship...
- Degree-Strength Correlation Reveals Anomalous Trading Behavior. Xiao-Qian Sun; Hua-Wei Shen; Xue-Qi Cheng; Zhao-Yang Wan // PLoS ONE;Oct2012, Vol. 7 Issue 10, Special section p1
Manipulation is an important issue for both developed and emerging stock markets. Many efforts have been made to detect manipulation in stock markets. However, it is still an open problem to identify the fraudulent traders, especially when they collude with each other. In this paper, we focus on...
