Does simple pairs trading still work?

Financial Analysts Journal

Volumn 66, Issue 4, 2010, Pages 83-95

  Do, Binh ^a   Faff, Robert ^b  

^a MONASH UNIVERSITY   (Australia)

^b UNIVERSITY OF QUEENSLAND   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 78549273059     PISSN: 0015198X     EISSN: None     Source Type: Journal    
DOI: 10.2469/faj.v66.n4.1     Document Type: Article

References (16)

1. Abreu, D., and M. Brunnermeier. 2002. "Synchronization Risk and Delayed Arbitrage." Journal of Financial Economics, vol. 66, no. 2-3 (November-December): 341-360.
2. Andrade, S., V. di Pietro, and M. Seasholes. 2005. "Understanding the Profitability of Pairs Trading." Working paper, University of California, Berkeley, and Northwestern University (February).
3. De Long, J., A. Shleifer, L. Summers, and R. Waldmann. 1990. "Noise Trader Risk in Financial Markets." Journal of Political Economy, vol. 98, no. 4 (August): 703-738.
4. Engelberg, J., P. Gao, and R. Jagannathan. 2009. "An Anatomy of Pairs Trading: The Role of Idiosyncratic News, Common Information and Liquidity." Working paper, University of North Carolina at Chapel Hill, University of Notre Dame, and Northwestern University (February).
5. Fama, E., and K. French. 1997. "Industry Costs of Equity." Journal of Financial Economics, vol. 43, no. 2 (February): 153-193.
6. Gatev, E., W. Goetzmann, and K. Rouwenhorst. 1999. "Pairs Trading: Performance of a Relative Value Arbitrage Rule." Working paper, Yale School of Management.
7. -. 2006. "Pairs Trading: Performance of a Relative-Value Arbitrage Rule." Review of Financial Studies, vol. 19, no. 3 (Fall): 797-827.
8. Hogan, S., R. Jarrow, M. Teo, and M. Warachka. 2004. "Testing Market Efficiency Using Statistical Arbitrage with Applications to Momentum and Value Strategies." Journal of Financial Economics, vol. 73, no. 3 (September): 525-565.
9. Jegadeesh, N., and S. Titman. 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency." Journal of Finance, vol. 48, no. 1 (March): 65-91.
10. Khandani, A., and A. Lo. 2007. "What Happened to the Quants in August 2007?" Journal of Investment Management, vol. 5, no. 4 (4th quarter): 5-54.
11. Kondor, P. 2009. "Risk in Dynamic Arbitrage: The Price Effects of Convergence Trading." Journal of Finance, vol. 64, no. 2 (April): 631-655.
12. Mitchell, M., T. Pulvino, and E. Stafford. 2002. "Limited Arbitrage in Equity Markets." Journal of Finance, vol. 57, no. 2 (April): 551-584.
13. Papadakis, G., and P. Wysocki. 2007. "Pairs Trading and Accounting Information." Working paper, Boston University School of Management and MIT Sloan School of Management (September).
14. Vogelsang, T. 1998. "Trend Function Hypothesis Testing in the Presence of Serial Correlation." Econometrica, vol. 66, no. 1 (January): 123-148.
15. Xiong, W. 2001. "Convergence Trading with Wealth Effects: An Amplification Mechanism in Financial Markets." Journal of Financial Economics, vol. 62, no. 2 (November): 247-292. (Pubitemid 33376371)
16. Yu, F. 2006. "How Profitable Is Capital Structure Arbitrage?" Financial Analysts Journal, vol. 62, no. 5 (September/ October): 47-62. (Pubitemid 44580203)