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Introductory Resources for Statistical Arbitrage

Article Quant Q&A · Author: CuriousMind
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Summary

The document compiles suggested starting points for learning the mathematics and practical applications of statistical arbitrage. Its recommendations include introductory quantitative trading books, a paper associated with mean-reverting models and principal component analysis, and historical and technical accounts of the field’s development. It also points readers toward material on related approaches such as factor models and momentum.

The recommendations are informal and do not present a unified curriculum, compare the sources in detail, or assess their current relevance. The practical orientation and accessibility claims reflect individual contributors’ opinions. The document is most useful as a shortlist for further reading; it does not itself explain or test a statistical-arbitrage strategy.

Key ideas

  • The suggested materials span practical books, technical papers, and historical accounts of statistical arbitrage.
  • Mean-reverting models and principal component analysis are identified as topics in a recommended paper.
  • The recommended books are described as including implementation examples and related investment approaches.
  • The list is informal and gives no systematic comparison or evaluation of the sources.

Tags

ArbitrageMean reversionStatisticsMomentum
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# References on Statistical Arbitrages


# References on Statistical Arbitrages












Is there any basic materials (books, papers) to read on Statistical Arbitrage?

I certainly understand much of the useful information is in the industry. I just want to get some understanding on the basic mathematical tools and their applications in finance.

## Answer by nbbo2 (score 1)

https://quant.stackexchange.com/a/17692

Start with http://en.wikipedia.org/wiki/Statistical_arbitrage and the references therein. Especially Avellaneda (technical) and Bookstaber (historical, how Bamberger and Thorp got the whole thing started).

## Answer by Quantopik (score 1)

https://quant.stackexchange.com/a/17703

I suggest you to start reading E. P. Chan's books; here below you can find the references:

> Chan, Ernest P. "Quantitative Trading." New Jersey (2008). Chan, Ernest P. "Algorithmic Trading: Winning Strategies and Their Rationale" New Jersey (2013).

His books are written down in a readable and simple way, so that a newbie can understand too, and, he provides a lot of practical examples of strategies implementation in Matlab. I think it could be a good beginning for who wants to start studying in this field. Those books contain also an introduction to other forms of investment, as the factor models, other than about statistical arbitrage-based strategies (mean-reversion, momentum,...). IMHO, it is worth to follow his blog too, where he discusses his strategies with the blog users'.

## Answer by Yawning Lion (score 1)

https://quant.stackexchange.com/a/17750

Try the Avellaneda (2009) paper. The strategy involves some mean-reverting models and some PCAs. Easy to read without getting too technical.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.