good books on statistical arbitrage

Discussion in 'Educational Resources' started by rs2000, Jun 9, 2016.

  1. rs2000


    hi All,

    I am working in an bank in the valuation control function for past 3 years, have an MBA, CFA and undergrad in computer engineering.

    I have been trading for my personal account in stocks, funds, etfs and am trying my luck with quant trading as a friend of mine has set up a fund and am trying my hand at Alphas and back-testing them on websim (world quant simulator).The fund will be in Alpha trading in Stocks only.

    I have read the following two books

    Finding Alphas: A Quantitative Approach to Building Trading Strategies
    Quantitative Trading: How to Build Your Own Algorithmic Trading Business

    Now both of these were good read into understanding the basics but I need some ideas on Statistical arbitrage strategies (momentum, mean reversion etc). I know no-one will write winning strategies for people to replicate but I am looking for starter ideas , run of the mill ideas that I can start with and innovate. which book/s do you think provides the Alpha ideas? some that mention specifics strategies and how & why these strategies work

    I have shortlisted a few, pls select amongst these or tell me about some others

    thanks a lot!

    Algorithmic Trading: Winning Strategies and Their Rationale
    byErnie Chan

    Statistical Arbitrage: Algorithmic Trading Insights and Techniques
    Oct 5, 2007
    by Andrew Pole

    (reviews are quite bad for the above)

    Expected Returns: An Investor's Guide to Harvesting Market Rewards
    Mar 14, 2011
    by Antti Ilmanen and Clifford Asness

    Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined
    Apr 13, 2015
    by Lasse Heje Pedersen
  2. rs2000


    hello all...any help here please?
  3. rs2000


    thanks, i am looking for specific recommendations on stats. arbitrage books, the one with more applicable stragies and alpha tips
  4. byteme


    It has probably been close to a decade since I read it but the Vidyamurthy book on Pairs Trading was pretty good I thought. If you already have a good grasp of the math then you might get some basic ideas from that book.

    There a probably a lot of old ET threads on this topic too. I recall Bright trading used to push pairs trading quite a bit.
  5. rs2000


    Thanks !
    I am going to order it
    Any more recommendations
  6. Ernest Chan's books are a good starting point, as are Paul Wilmott's introductory quant finance books. Financial Time Series book by Tsay is very good from what I hear (no personal experience there). Wilmott and Tsay of course don't directly deal with Stat Arb, but I suspect you will find enough useful info there. Pairs Trading book is quite good as well.

    There are other Financial Engineering/Stochastic Finance books that could be of use, though again, not directly for Stat Arb. Look up the books by Shiriaev and see if you like any of them.
  7. byteme


    Wilmott et al. books are good but I would suggest to the OP to give them a pass, unless he wants to pivot to derivatives pricing or risk at some point in the future.

    Whilst the Wilmott books are more practical than other more theoretical tomes, I still don't recall reading about any trading strategies therein so not sure it would be a good use of the OPs time unless he already has the requisite math aptitude to breeze through them.

    Sadly, for as long as I can remember there has been a dearth of quality and genuinely practical books in this space
  8. Trader13


  9. rs2000


    Thanks a lot everyone

    I do spend a lot of time finding latest papers on google but haven't had much luck yet.

    please could you tell me of a good online blogs I can refer? and also somewhere I could search for research papers
    #10     Jun 14, 2016