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# Category Archives: Mean Reversion

## The Lazarus Effect

A perennial favorite with investors, presumably because they are easy to understand and implement, are trades based on a regularly occurring pattern, preferably one that is seasonal in nature. A well-known example is the Christmas effect, wherein equities generally make … Continue reading

Posted in Mean Reversion, Pattern Trading, S&P500 Index, Seasonal Effects
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## Combining Momentum and Mean Reversion Strategies

The Fama-French World For many years now the “gold standard” in factor models has been the 1996 Fama-French 3-factor model: Here r is the portfolio’s expected rate of return, Rf is the risk-free return rate, and Km is the return of the market portfolio. … Continue reading

Posted in Factor Models, Mean Reversion, Momentum, VIX Index, Volatility Modeling
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## Developing Statistical Arbitrage Strategies Using Cointegration

In his latest book (Algorithmic Trading: Winning Strategies and their Rationale, Wiley, 2013) Ernie Chan does an excellent job of setting out the procedures for developing statistical arbitrage strategies using cointegration. In such mean-reverting strategies, long positions are taken in … Continue reading

Posted in Cointegration, Johansen, Matlab, Mean Reversion, Pairs Trading, Statistical Arbitrage, Strategy Development, Systematic Strategies
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## A Practical Application of Regime Switching Models to Pairs Trading

In the previous post I outlined some of the available techniques used for modeling market states. The following is an illustration of how these techniques can be applied in practice. You can download this post in pdf format here. The chart … Continue reading

Posted in ARMA, Econometrics, ETFs, Markov Model, Mean Reversion, Pairs Trading, Regime Switching, Statistical Arbitrage
Tagged ETFs, Kalman Filter, Markov Model, Pairs Trading, Regime Switching, Statistical Arbitrage
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