Please recommend books for statistical arbitrage
Hi everyone,
I'm going to join a hedge fund, which is implementing statistical arbitrage / quant trading on US equity. I am computer science / MFE background, but have quite limited understanding about statistical arbitrage. Therefore, I want to get prepared before on board, by reading some good books introducing this particular type of trading strategy.
The ideal books would be ones that provide in-depth explanation about the various strategies along with lots of examples, and it would the best that the examples are written in C++ as that's the language this firm is using.
Of course, it doesn't have to be above type of book. any book you think worth reading is very much appreciated.
Anyone has any thought please?
I think reading through papers would offer a more practical understanding of statistical arbitrage. Perhaps try implementing a pairs-trading algorithm.
Statistical Arbitrage Using Pairs Trading With Support Vector Machine Learning by G. Madhavaram (sp?) is available online and is a relatively light (albeit slightly inaccurate) introduction.
Statistical Arbitrage in the U.S. Equities Market by Avellanada and Lee would also be good and is availably freely online.
This is spot on.
You'll get better information from reading research papers.
Thanks shortmyshit & QGKZ. It's very helpful.
[Info Inside] Resources to make an algorithm based off statistical arbitrage? (Originally Posted: 12/14/2017)
So I've been keeping an eye on certain equity pairs, and want to employ some statistical arbitrage. Don't want to go into detail incase someone here wants to take it but I think it has the potential to make millions. The pairs are extremely consistent in the pattern. Any resources where I can learn how to spin all this up into a money machine?
Look into basic cointegration and pairs trading techniques - wikipedia and basic python or R should be all you need.
THANK YOU. +1. I'm going to read up on this. I want to backtest this, and see if it really works. I have some solid pairs here, and it's so consistent. I just know you usually need billions to make money off this, and a super computer.
Stat Arb (Originally Posted: 08/21/2008)
When i flip through job postings for trader positions the single most common strategy being sought after is high frequency stat arb traders. I was introduced to the strategy in more depth this summer but I am no means an expert on it.
The underlying investment thesis appears to be that 2 securities have a historical relationship over a given timeframe and they tend to revert to the mean. This strategy seems to have the same underlying principles as what LTCM used.
I thought margins in this area were already razor thin as many hedge funds already arb the market to death making these inefficiencies disappear however this is by far the most commonly sought after equity trading position.
If anyone has any further information on it I would be interested in hearing more.
funny fact about stat arb:
only so many stocks have characteristics that make them suit for stat arb candidates, so many hedge funds use them. if one of them blows up and liquidate, the other hedge funds that own these stocks are screwed too(relationship further away from historical norm). so one of the risk factors when picking stocks to use for stat arb is "the risk that other hedge funds are using the same pair". a little game theory.
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