Empirical Investigation of an Equity Pairs Trading Strategy

• 成果类型: Article
• 署名作者: Chen, Huafeng (Jason); Chen, Shaojun (Jenny); Chen, Zhuo; Li, Feng
• 署名单位: Tsinghua University; Shanghai Jiao Tong University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2825
• 发表日期: 2019
• 页码: 370-389
• 关键词: pairs trading; pairs momentum; industry momentum; short-term reversal

摘要

We show that an equity pairs trading strategy generates large and significant abnormal returns. We find that two components of the trading signal (i.e., short-term reversal and pairs momentum) have different dynamic and cross-sectional properties. The pairs momentum is largely explained by the one-month version of the industry momentum. Therefore, the pairs trading profits are largely explained by the short-term reversal and a version of the industry momentum.