Statistical Arbitrage: An Approach from Econophysics

José Pedro Ramos-Requena (), Antonio García Amate () and María de las Nieves López-García ()
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José Pedro Ramos-Requena: University of Almeria
Antonio García Amate: University of Almeria
María de las Nieves López-García: University of Almeria

Chapter Chapter 16 in Advances in Quantitative Methods for Economics and Business, 2025, pp 313-333 from Springer

Abstract: Abstract The statistical arbitrage strategy emerged in the mid-80s, developed by a group of scientists associated with Morgan Stanley’s investment bank. This approach entails the choice of a pair of financial assets that have traditionally shown parallel movements. A profit can be achieved by establishing a long-short position on this pair when they move apart, resulting in gains upon their subsequent return to an average when closing the position. In this chapter, we are going to conduct a study on the application of this methodology by applying methods from the field of econophysics. To do this, we will examine the Hurst exponent method, which is one of the approaches that best fits to measure the mean reversion of financial series.

Keywords: Statistical arbitrage; Pairs trading; Econophysics; Hurst exponent (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-84782-0_16

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DOI: 10.1007/978-3-031-84782-0_16

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