Please recommend books for statistical arbitrage

weals73's picture
Rank: Chimp | 4

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.

Comments (11)

Mar 28, 2016

Anyone has any thought please?

Mar 29, 2016

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.

Mar 29, 2016
shortmyshit:

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.

Mar 30, 2016

Thanks shortmyshit & QGKZ. It's very helpful.

Mar 30, 2016

Look into basic cointegration and pairs trading techniques - wikipedia and basic python or R should be all you need.

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Mar 30, 2016

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.

Mar 30, 2016

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.

Mar 30, 2016
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