Statistical Arbitrage: Algorithmic Trading Insights and Techniques (Wiley Finance) [Hardcover]

Andrew Pole (Author)

Book Description

Publication Date: October 5, 2007 | ISBN-10: 0470138440 | ISBN-13: 978-0470138441 | Edition: 1

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.

Editorial Reviews

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)

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.

See all Editorial Reviews

Product Details

• Hardcover: 230 pages
• Publisher: Wiley; 1 edition (October 5, 2007)
• Language: English
• ISBN-10: 0470138440
• ISBN-13: 978-0470138441
• Product Dimensions: 9 x 6.3 x 1 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 2.3 out of 5 stars  See all reviews (15 customer reviews)
• Amazon Best Sellers Rank: #574,800 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

44 of 49 people found the following review helpful:

1.0 out of 5 stars If you are a quant, don't buy this book, January 4, 2008

By 

N. Tuzov "Nik Tuzov" (Illinois, USA) - See all my reviews
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Amazon Verified Purchase

This review is from: Statistical Arbitrage: Algorithmic Trading Insights and Techniques (Wiley Finance) (Hardcover)

Like some other people, I got attracted by the title and ordered it even before it was released. Indeed, unlike the earlier publications such as Pairs Trading: Quantitative Methods and Analysis (Wiley Finance) and Applied Quantitative Methods for Trading and Investment (The Wiley Finance Series) , this book is probably the very first one dedicated entirely to Statistical Arbitrage.

Regrettably, its quantitative content is well below that of abovementioned books. As the author himself put it, "... nearly all temptation to compose a technical treatise has been resisted." As a result, all the technical stuff I learned from it can be summarized as follows: 1) the traded spread is very often non-stationary, but can be treated as locally stationary and 2) after 2004, the spread began exhibiting much sharper reversions to the mean ("catastrophe process") which complicated the trading.

None of these ideas, however, are presented in more or less strict quantitative form. I hoped that the bibliography would provide clues as to the particular models employed, but to no avail: the list of sources is quite short (22 items) with the majority of quantitative sources being obsolete (over ten years old).

All in all, this book is very much like a popular article and is not worth its price from a quant's perspective.

34 of 41 people found the following review helpful:

1.0 out of 5 stars Save money and forests, October 16, 2007

By 

Joel S. Guglietta (Hong Kong) - See all my reviews
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This review is from: Statistical Arbitrage: Algorithmic Trading Insights and Techniques (Wiley Finance) (Hardcover)

Buying this book is (too late for me) a total waste of money. On page 52, u ll read:
"3.4.5. fractal Analysis
We refer the interested reader to the inventor, Benoit B. Mandelbrot 2004, who tells it best."
...and that s it.
This is not serious Mr Pole! Well, surf Google for free. This will tell u best about everything this "book" is about, from GARCH to exponential moving averages and other under-grad materials.

19 of 22 people found the following review helpful:

1.0 out of 5 stars frustrating and too expensive, November 1, 2007

By 

Tudor F. Moga (New York, NY USA) - See all my reviews
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This review is from: Statistical Arbitrage: Algorithmic Trading Insights and Techniques (Wiley Finance) (Hardcover)

some interesting concepts but all very vague.There are very few practical ideas that can be taken out of this book and it's way too expensive for what it is. One would be better off by googling the table of contents of this book than by actualy reading it.