QUESTIONS
- What is the difference between “pure arbitrage” and “statistical arbitrage”?
- What is the difference between a relative return strategy and an absolute return strategy?
- Why is a t-test important when estimating a statistical arbitrage model?
- How are cointegration and error correction models related?
- What is meant by a “self-financing” strategy?
1 Douglas Ehrman, “Pairs Trading: New Look at an Old Strategy,” Futures 33, no. 6 (May 2004): 32–34 and Ron McEwan, “A Simplified Approach to Pairs Trading,” Futures 32, no. 15 (December 2003): 34–37.
2 Oleg Bondarenko, “Statistical Arbitrage and Securities Prices,” Review of Financial Studies 16, no. 3 (2003): 875–919.
3 Steven Hogan, Robert Jarrow, Melvyn Teo, and Mitch Warachka, “Testing Market Efficiency Using Statistical Arbitrage with Applications to Momentum and Value Strategies,” Journal of Financial Economics 73 no. 3 (2004): 525–565.
4 David Dickey, Dennis Jansen, and Daniel Thornton, “A Primer On Cointegration with an Application to Money and Income,” Federal Reserve Bank of St. Louis, March/April 1991, pp. 58–78.
5 George Wang and Jot Yau, “A Time Series Approach to Testing for Market Linkage: Unit Root and Cointegration Test,” Journal of Futures Markets 14, no. 4 (1994): 457–474.
6 Carol Alexander and Anca Dimitriu, “Indexing and Statistical Arbitrage,” Journal of Portfolio Management 31, no. 2 (2005): 50–53.
7 John Tatom, “Stock Prices, Inflation and Monetary Policy,” Business Economics 37 no. 4 (2002): 7–19 and ...
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