Empirical Investigation of an Equity Pairs Trading Strategy
We show that an equity pairs trading strategy generates large and significant abnormal returns. We find that two components of the trading signal (i.e., short-term reversal and pairs momentum) have different dynamic and cross-sectional properties. The pairs momentum is largely explained by the one-m...
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| Veröffentlicht in: | Management science 2019-01, Vol.65 (1), p.370-389 |
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| creator | Chen, Huafeng (Jason) Chen, Shaojun (Jenny) Chen, Zhuo Li, Feng |
| description | We show that an equity pairs trading strategy generates large and significant abnormal returns. We find that two components of the trading signal (i.e., short-term reversal and pairs momentum) have different dynamic and cross-sectional properties. The pairs momentum is largely explained by the one-month version of the industry momentum. Therefore, the pairs trading profits are largely explained by the short-term reversal and a version of the industry momentum.
The online appendix is available at
https://doi.org/10.1287/mnsc.2017.2825
.
This paper was accepted by Lauren Cohen, finance. |
| doi_str_mv | 10.1287/mnsc.2017.2825 |
| format | Article |
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The online appendix is available at
https://doi.org/10.1287/mnsc.2017.2825
.
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The online appendix is available at
https://doi.org/10.1287/mnsc.2017.2825
.
This paper was accepted by Lauren Cohen, finance.</description><subject>Analysis</subject><subject>Equity</subject><subject>industry momentum</subject><subject>pairs momentum</subject><subject>pairs trading</subject><subject>Profits</subject><subject>Rates of return</subject><subject>Reversal</subject><subject>Securities trading</subject><subject>Short term</subject><subject>short-term reversal</subject><subject>Trading</subject><issn>0025-1909</issn><issn>1526-5501</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2019</creationdate><recordtype>article</recordtype><sourceid>N95</sourceid><recordid>eNqFkd1LIzEUxYO4YP149U0YEHxyapKZzAc-SemqIOzCus_hNpOMKZ1Mzc2I_e83Q0W3UJBAAsnvnHtvDiHnjE4Zr8qbzqGacsrKKa-4OCATJniRCkHZIZlQykXKalofkWPEJaW0rMpiQm7n3dp6q2CVPLo3jcG2EGzvkt4k4JL562DDJvkN1mPy7KGxrk3-BA9Bt5tT8sPACvXZx3lC_v6cP88e0qdf94-zu6dUiUKEVDRGgVhQltWUVqzS0CjFTQ6Q5yrT2cLAIoOirpXRmSjKutANjY9ZXRlTMshOyOXWd-371yH2KJf94F0sKTmrRLTMWf1FtbDS0jrTxzZVZ1HJO1GK6BzHj1S6h2q10x5WvdPGxusdfrqHj6vRnVV7BVc7gsgE_R5aGBDlLnj9H7gY0DqNcUPbvgTc8vsaUb5H9NrItbcd-I1kVI75yzF_OeYvx_yj4GIrWGLo_Sedx9hpwfnXT4xD-Q6_8_sHDB25Cg</recordid><startdate>201901</startdate><enddate>201901</enddate><creator>Chen, Huafeng (Jason)</creator><creator>Chen, Shaojun (Jenny)</creator><creator>Chen, Zhuo</creator><creator>Li, Feng</creator><general>INFORMS</general><general>Institute for Operations Research and the Management Sciences</general><scope>AAYXX</scope><scope>CITATION</scope><scope>N95</scope><scope>XI7</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope><orcidid>https://orcid.org/0000-0002-0606-9995</orcidid></search><sort><creationdate>201901</creationdate><title>Empirical Investigation of an Equity Pairs Trading Strategy</title><author>Chen, Huafeng (Jason) ; Chen, Shaojun (Jenny) ; Chen, Zhuo ; Li, Feng</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c565t-5dfca5b013900818eadcc2f4aa44c3e3bfab3a699cfe356796ed0aa4398ff71a3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2019</creationdate><topic>Analysis</topic><topic>Equity</topic><topic>industry momentum</topic><topic>pairs momentum</topic><topic>pairs trading</topic><topic>Profits</topic><topic>Rates of return</topic><topic>Reversal</topic><topic>Securities trading</topic><topic>Short term</topic><topic>short-term reversal</topic><topic>Trading</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Chen, Huafeng (Jason)</creatorcontrib><creatorcontrib>Chen, Shaojun (Jenny)</creatorcontrib><creatorcontrib>Chen, Zhuo</creatorcontrib><creatorcontrib>Li, Feng</creatorcontrib><collection>CrossRef</collection><collection>Gale Business: Insights</collection><collection>Business Insights: Essentials</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Management science</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Chen, Huafeng (Jason)</au><au>Chen, Shaojun (Jenny)</au><au>Chen, Zhuo</au><au>Li, Feng</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Empirical Investigation of an Equity Pairs Trading Strategy</atitle><jtitle>Management science</jtitle><date>2019-01</date><risdate>2019</risdate><volume>65</volume><issue>1</issue><spage>370</spage><epage>389</epage><pages>370-389</pages><issn>0025-1909</issn><eissn>1526-5501</eissn><abstract>We show that an equity pairs trading strategy generates large and significant abnormal returns. We find that two components of the trading signal (i.e., short-term reversal and pairs momentum) have different dynamic and cross-sectional properties. The pairs momentum is largely explained by the one-month version of the industry momentum. Therefore, the pairs trading profits are largely explained by the short-term reversal and a version of the industry momentum.
The online appendix is available at
https://doi.org/10.1287/mnsc.2017.2825
.
This paper was accepted by Lauren Cohen, finance.</abstract><cop>Linthicum</cop><pub>INFORMS</pub><doi>10.1287/mnsc.2017.2825</doi><tpages>20</tpages><orcidid>https://orcid.org/0000-0002-0606-9995</orcidid></addata></record> |
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| language | eng |
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| source | INFORMS PubsOnLine; EBSCOhost Business Source Complete |
| subjects | Analysis Equity industry momentum pairs momentum pairs trading Profits Rates of return Reversal Securities trading Short term short-term reversal Trading |
| title | Empirical Investigation of an Equity Pairs Trading Strategy |
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