The high sensitivity of pairs trading returns - Archive ouverte HAL
Article Dans Une Revue Applied Economics Letters Année : 2013

The high sensitivity of pairs trading returns

Résumé

Pairs trading is a simple and popular relative value trading strategy. This article deals with the most common implementation of the method based on a distance criterion. It demonstrates the high sensitivity of the return to changes in the length of the formation period and shows that a reasonable modification of this parameter may lead to generate positive excess returns which are robust to data snooping. This empirical result underlines the difficulty in understanding pairs trading returns, dynamics and sources of profitability through time.
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Dates et versions

hal-01514549 , version 1 (26-04-2017)

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Nicolas Huck. The high sensitivity of pairs trading returns. Applied Economics Letters, 2013, 20 (14), pp.1301 - 1304. ⟨10.1080/13504851.2013.802121⟩. ⟨hal-01514549⟩
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