In this article, I would like to introduce statistical arbitrage (statarb) the way I understand it, as a practitioner at the forefront of the dark arts of statistical arbitrage. A little more googling and one shall find that the quintessential statistical arbitrage implementation is that of pairs-trading. However, neither the Wikipedia entry nor pairs trading is a complete representation of what statarb is. I would even argue that the Wikipedia entry represents a very dated view on what statarb can be.
My main gripe with these definitions of statarb is that they miss the crux of what statarb is about, and instead choose to focus on a very narrow definition of statarb - that of mean-reversion signals.
The Modern Spirit Of Statistical Arbitrage
In this article, I would like to introduce statistical arbitrage (statarb) the way I understand it, as a practitioner at the forefront of the dark arts of statistical arbitrage. A little more googling and one shall find that the quintessential statistical arbitrage implementation is that of pairs-trading. However, neither the Wikipedia entry nor pairs trading is a complete representation of what statarb is. I would even argue that the Wikipedia entry represents a very dated view on what statarb can be. My main gripe with these definitions of statarb is that they miss the crux of what statarb is about, and instead choose to focus on a very narrow definition of statarb - that of mean-reversion signals.