Statistical Arbitrage:Algorithmic Trading (Andrew Pole)

Review
"Over time, anything that creates an edge for a particular group of bettors—including the most astute observers of horse flesh—gets factored into the odds and becomes unreliable as a system. That's the classic argument of random walk theorists, and the equally classic response is that there's a lot of money to be made before that factoring is complete. This book is a contribution to that never-ending debate." (Hedgeworld.com)

Product Description
While statistical arbitrage has faced some tough times?as markets experienced dramatic changes in dynamics beginning in 2000?new developments in algorithmic trading have allowed it to rise from the ashes of that fire. Based on the results of author Andrew Pole?s own research and experience running a statistical arbitrage hedge fund for eight years?in partnership with a group whose own history stretches back to the dawn of what was first called pairs trading?this unique guide provides detailed insights into the nuances of a proven investment strategy. Filled with in-depth insights and expert advice, Statistical Arbitrage contains comprehensive analysis that will appeal to both investors looking for an overview of this discipline, as well as quants looking for critical insights into modeling, risk management, and implementation of the strategy.

From the Inside Flap

While statistical arbitrage has faced some tough times—as markets experienced dramatic changes in dynamics beginning in 2000—recent developments in algorithmic trading have fueled the resurgence of this discipline.

With new, sustained patterns of stock price dynamics emerging and some old patterns regaining potency, there are plenty of profitable opportunities available for the shrewd statistical arbitrageur.

Based on the results of author Andrew Pole's own research and extensive experience running a statistical arbitrage hedge fund—in partnership with a group whose own history stretches back to the dawn of what was first called pairs trading—Statistical Arbitrage provides you with comprehensive coverage of this proven investment approach. Through real-life examples and detailed discussions, this unique guide presents you with a critical analysis of what statistical arbitrage is and how it has been historically practiced; a formal theoretical underpinning for the existence of opportunities and quantification thereof; and an extensive explanation of the enormous shifts in the structure of the U.S. economy—reflected in the financial markets—with specific focus on the consequences for arbitrage possibilities.

Page by page, you'll become familiar with the nuances of modern statistical arbitrage and discover the algorithmic trading techniques you need to succeed in today's markets. Created with the serious financial professional in mind, this well-written resource:

Introduces the concept of pairs trading and elaborates on some of its main features

Outlines formal statistical models for more general portfolios—several popular models for time series are described, from basic weighted moving averages to dynamic factor analysis

Addresses important questions for quantifying the magnitude of exploitable opportunities in reversion gambits

Characterizes the problems that beset statistical arbitrage in 2000 and directly caused its catastrophic drop in returns from 2002 to 2004

Reveals how statistical arbitrage has rebounded through technological developments in algorithmic trading

Provides valuable insight into practical model building

Filled with innovative information and expert advice, Statistical Arbitrage contains essential analysis that will appeal to individuals looking for an overview of this discipline, and to institutional investors looking for critical insights into modeling, risk management, and implementation of this important strategy.