Cointegration and pairs selection

Discussion in 'Strategy Building' started by MeanerRevert, Sep 18, 2003.

  1. olintner

    olintner

    I fear that a noble price doesn't help solving the task of making money in the markets (LTCM) :)

    The smarter you are - the longer it takes to make money.

    Good trading
     
    #11     Oct 10, 2003
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  2. FishSauce

    FishSauce

    A problem with cointegration is that the error term is assumed to be N(0,1) ... if I am not mistaken. If this is true, then cointegration pairing is worthless. Say that on T=100, that the residual is 2 standard deviation away. For T=101, there is NO mean reversion.



    Again, I might be wrong .. dead wrong.
     
    #12     Oct 10, 2003
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  3. m&m&m

    m&m&m

    Nobel prize itself is pretty good money, even if you share it with another guy :p
     
    #13     Oct 10, 2003
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