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- Publisher Website: 10.1016/j.frl.2017.12.011
- Scopus: eid_2-s2.0-85044659952
- WOS: WOS:000444663700025
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Article: A single-stage approach for cointegration-based pairs trading
Title | A single-stage approach for cointegration-based pairs trading |
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Authors | |
Keywords | Cointegration Pairs trading Power statistic Return maximization Risk control |
Issue Date | 2018 |
Publisher | Academic Press. The Journal's web site is located at http://www.elsevier.com/locate/frl |
Citation | Finance Research Letters, 2018, v. 26, p. 177-184 How to Cite? |
Abstract | Pairs trading can be regarded as conditional mean reversion strategies. The conditions are usually imposed in two stages: Identification of pairs’ relationship and the opening (and closing) mechanism sequentially as a ‘pass or fail’ test. Nevertheless, as cointegration relationship is often not a ‘yes or no’ question but a ‘strong or weak’ one, dichotomizing the relationship through screening may not be optimal. This research presents a new single-stage approach to pairs trading based on a single ‘power statistic’. Its superiority in attaining better risk-to-reward ratios is demonstrated empirically in a large scale backtest study.1 |
Persistent Identifier | http://hdl.handle.net/10722/261387 |
ISSN | 2023 Impact Factor: 7.4 2023 SCImago Journal Rankings: 1.903 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | LAW, KF | - |
dc.contributor.author | Li, WK | - |
dc.contributor.author | Yu, PLH | - |
dc.date.accessioned | 2018-09-14T08:57:20Z | - |
dc.date.available | 2018-09-14T08:57:20Z | - |
dc.date.issued | 2018 | - |
dc.identifier.citation | Finance Research Letters, 2018, v. 26, p. 177-184 | - |
dc.identifier.issn | 1544-6123 | - |
dc.identifier.uri | http://hdl.handle.net/10722/261387 | - |
dc.description.abstract | Pairs trading can be regarded as conditional mean reversion strategies. The conditions are usually imposed in two stages: Identification of pairs’ relationship and the opening (and closing) mechanism sequentially as a ‘pass or fail’ test. Nevertheless, as cointegration relationship is often not a ‘yes or no’ question but a ‘strong or weak’ one, dichotomizing the relationship through screening may not be optimal. This research presents a new single-stage approach to pairs trading based on a single ‘power statistic’. Its superiority in attaining better risk-to-reward ratios is demonstrated empirically in a large scale backtest study.1 | - |
dc.language | eng | - |
dc.publisher | Academic Press. The Journal's web site is located at http://www.elsevier.com/locate/frl | - |
dc.relation.ispartof | Finance Research Letters | - |
dc.subject | Cointegration | - |
dc.subject | Pairs trading | - |
dc.subject | Power statistic | - |
dc.subject | Return maximization | - |
dc.subject | Risk control | - |
dc.title | A single-stage approach for cointegration-based pairs trading | - |
dc.type | Article | - |
dc.identifier.email | Li, WK: hrntlwk@hkucc.hku.hk | - |
dc.identifier.email | Yu, PLH: plhyu@hku.hk | - |
dc.identifier.authority | Li, WK=rp00741 | - |
dc.identifier.authority | Yu, PLH=rp00835 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1016/j.frl.2017.12.011 | - |
dc.identifier.scopus | eid_2-s2.0-85044659952 | - |
dc.identifier.hkuros | 290952 | - |
dc.identifier.volume | 26 | - |
dc.identifier.spage | 177 | - |
dc.identifier.epage | 184 | - |
dc.identifier.isi | WOS:000444663700025 | - |
dc.publisher.place | United States | - |
dc.identifier.issnl | 1544-6131 | - |