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Pairs Trading: Performance of a Relative Value Arbitrage Rule

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  • Evan Gatev
  • William Goetzmann
  • K. Rouwenhorst

Abstract

We test a Wall Street investment strategy, pairs trading, with daily data over 1962-2002. Stocks are matched into pairs with minimum distance between normalized historical prices. A simple trading rule yields average annualized excess returns of up to 11 percent for selffi

Suggested Citation

  • Evan Gatev & William Goetzmann & K. Rouwenhorst, 1998. "Pairs Trading: Performance of a Relative Value Arbitrage Rule," Yale School of Management Working Papers ysm3, Yale School of Management, revised 01 Aug 2000.
    • Handle: RePEc:ysm:wpaper:ysm3
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    File URL: https://repec.som.yale.edu/icfpub/publications/2573.pdf
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