Pairs selection and outranking: An application to the S&P 100 index

Nicolas Huck ()

European Journal of Operational Research, 2009, vol. 196, issue 2, 819-825

Abstract: Pairs trading is a popular quantitative speculation strategy. This article proposes a general and flexible framework for pairs selection. The method uses multiple return forecasts based on bivariate information sets and multi-criteria decision techniques. Our approach can be seen as a sort of forecast combination but the output of the method is a ranking. It helps to detect potentially under- and overvalued stocks. A first application with S&P 100 index stocks provides promising results in terms of excess return and directional forecasting.

Keywords: Finance; Pairs; trading; Multi-criteria; decision; aiding; ELECTRE; III (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:196:y:2009:i:2:p:819-825

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