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Statistical Arbitrage Related Scholarly Compositions

See also: Statistical Arbitrage Related News, Statistical Arbitrage Related Books, or Statistical Arbitrage Home Page.
 
Table of Contents:
 

Behavioral Statistical Arbitrage
by Dmytro Sudak & Olena Suslova
University of Lausanne
April, 2004


Abstract
One of the inefficiencies observed on the financial markets is a momentum effect. This inefficiency can be exploited by a trading strategy. Most of the empirical studies of momentum effect were made on the US stock market...

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A Computational Methodology for Modelling the Dynamics of Statistical Arbitrage
by Andrew Neil Burgess
London Business School


Abstract
Recent years have seen the emergence of a multi-disciplinary research area known as ďComputational FinanceĒ. In many cases the data generating processes of financial and other economic time-series are at best imperfectly understood. By allowing restrictive assumptions about price dynamics to be relaxed, recent advances in computational modelling techniques offer the possibility to discover new ďpatternsĒ in market activity...

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Dry Markets and Statistical Arbitrage Bounds for European Derivatives
by Joao Amaro de Matos & Ana Lacerda
2006


Abstract
We derive statistical arbitrage bounds for the buying and selling price of European derivatives under incomplete markets. In this paper, incompleteness is generated due to the fact that the market is dry, i.e., the underlying asset cannot be transacted at certain points in time. In particular, we refine the notion of statistical arbitrage in order to extend the procedure for the case where dryness is random, i.e., at each point in time the asset can be transacted with a given probability...

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INFERENCE AND ARBITRAGE: THE IMPACT OF STATISTICAL ARBITRAGE ON STOCK PRICES
by Tobias Adrian
Massachusetts Institute of Technology
April 28, 2003


Abstract
What are the trade-offs that statistical arbitrageurs face? What is the impact of statistical arbitrage on equilibrium asset prices? This paper models the impact of arbitrageurs on stock prices when arbitrageurs have to learn about the long-run behavior of the stock price process...

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Limits of Arbitrage: Understanding How Hedge Funds Fail
by Mila Getmansky & Andrew W. Lo
March 2, 2005


Abstract
Even if arbitrage opportunities are found in a statistical sense, they might not be
exploitable due to unexpected widening of spreads. This paper models such a
case in the framework of a hedge fund. Specifically, Long Term Capital
Management is presented as a case study...

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A Market Neutral Statistical Arbitrage Trading Model
by Erik Larsson, Lars Larsson, & Johan Aberg
March 13, 2003


Abstract
The momentum effect is a systematic inefficiency in the market that can be exploited by a trading strategy. This conclusion is supported by theoretical and empirical evidence. But the academic research that tries to quantify the performance of this kind of strategy often relies on a methodology that is too simplistic...

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Robust Tests of Market Efficiency using Statistical Arbitrage
by Melvyn Teo, Yiu Kuen Tse, & Mitch Warachka
Singapore Management University
April, 2004


Abstract
This paper develops robust tests of market efficiency using statistical arbitrage which circumvent the joint-hypotheses dilemma confounding the traditional literature. Hogan, Jarrow, Teo and Warachka (2004) identify statistical arbitrage opportunities in momentum and value strategies. However, their results are sensitive to the assumption that expected incremental trading profits are constant...

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Statistical Arbitrage and Market Efficiency: Enhanced Theory, Robust Tests and Further Applications
by Robert Jarrow, Melvyn Teo, Yiu Kuen Tse, & Mitch Warachka
February, 2005


Abstract
Statistical arbitrage enables tests of market efficiency which circumvent the joint-hypotheses dilemma. This paper makes several contributions to the statistical arbitrage framework. First, we enlarge the set of statistical arbitrage opportunities in Hogan, Jarrow, Teo, and Warachka (2004) to avoid penalizing incremental trading profits with positive deviations from their expected value...

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STATISTICAL ARBITRAGE MODELS OF THE FTSE 100
by A.N. Burgess
London Business School


Abstract
In this paper we describe a set of statistical arbitrage models which exploit relative value relationships amongst the constituents of the FTSE 100. Rather than estimating cointegration vectors of high dimensionality, a stepwise regression approach is used to identify the most appropriate subspace for the
stochastic detrending of each individual equity price. A Monte Carlo simulation is used to identify the empirical distribution of the Variance Ratio profile of the regression residuals, under the null hypothesis of random walk behaviour...

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Statistical Arbitrage and Securities Prices
by Oleg Bondarenko
University of Illinois at Chicago


Abstract
This article introduces the concept of a statistical arbitrage opportunity (SAO). In a finite-horizon economy, a SAO is a zero-cost trading strategy for which (i) the
expected payoff is positive, and (ii) the conditional expected payoff in each final
state of the economy is nonnegative. Unlike a pure arbitrage opportunity, a SAO can have negative payoffs provided that the average payoff in each final state is non-negative...

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Testing Market Efficiency using Statistical Arbitrage with Applications to Momentum and Value Strategies
by S. Hogan, R. Jarrow, M. Teo, & M. Warachka
Credit Suisse First Boston, Johnson Graduate School of Management, Singapore Management University
September, 2003


Abstract
This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the joint hypothesis dilemma of traditional market efficiency tests because its definition is independent of any equilibrium model and its existence is incompatible with market efficiency. We provide a methodology to test for statistical arbitrage and then empirically
investigate whether momentum and value trading strategies constitute statistical arbitrage opportunities...

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Back to Scholarly Compositions

See also: Statistical Arbitrage Related News, Statistical Arbitrage Related Books, or Statistical Arbitrage Home Page.

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