Cointegration intermediate
Two price series can drift for years and still be tied together by a stationary spread. Cointegration is the formal way to express that hidden long-run anchor.
Two price series can drift for years and still be tied together by a stationary spread. Cointegration is the formal way to express that hidden long-run anchor.
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References
Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models
Søren Johansen
(1991)
— Econometrica
Selection of a Portfolio of Pairs Based on Cointegration: A Statistical Arbitrage Strategy
João Caldeira, Guilherme V. Moura
(2013)
— SSRN Electronic Journal
Co-Integration and Error Correction: Representation, Estimation, and Testing
Robert F. Engle, C. W. J. Granger
(1987)
— Econometrica
Maximum Likelihood Estimation and Inference on Cointegration — with Applications to the Demand for Money
Søren Johansen, Katarina Juselius
(1990)
— Oxford Bulletin of Economics and Statistics
The profitability of pairs trading strategies: distance, cointegration and copula methods
Hossein Rad, Rand Kwong Yew Low, Robert Faff
(2016)
— Quantitative Finance