INVESTIGATION OF STOCHASTIC PAIRS TRADING STRATEGIES UNDER DIFFERENT VOLATILITY REGIMES

We investigate several market-neutral trading strategies and find empirical evidence that market-neutral equity trading outperforms in 2008, the first full year of the global financial meltdown. In our experiments we use 14 distinct market-neutral trading strategies, using the combination of seven trading methods and two selection methods of pairs trading. Copyright � 2010 The Authors. Journal compilation � 2010 Blackwell Publishing Ltd and The University of Manchester.