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Statistical Arbitrage: An Approach from Econophysics

In: Advances in Quantitative Methods for Economics and Business

Author

Listed:
  • José Pedro Ramos-Requena

    (University of Almeria)

  • Antonio García Amate

    (University of Almeria)

  • María de las Nieves López-García

    (University of Almeria)

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.

Suggested Citation

  • José Pedro Ramos-Requena & Antonio García Amate & María de las Nieves López-García, 2025. "Statistical Arbitrage: An Approach from Econophysics," Springer Books, in: Salvador Cruz Rambaud & Juan Evangelista Trinidad Segovia & Catalina B. García-García (ed.), Advances in Quantitative Methods for Economics and Business, chapter 0, pages 313-333, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-84782-0_16
    DOI: 10.1007/978-3-031-84782-0_16
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