Pairs‐trading and spread persistence in the European stock market
改编了需求与供给框架，说明配对交易中价差均值回归速度与盈利性的关系，并引入基于持续性的交易触发规则。应用于STOXX Europe 600股票，策略利用价格领导力复制投资组合，夏普比率优于文献中的基准规则，加入公司基本面限制后表现更佳。
In this paper, we adapt the demand and supply framework introduced by Figuerola‐Ferretti and Gonzalo ( Journal of Econometrics , 2010) to illustrate the dynamics of Pairs‐trading. We underline the process by which a finite elasticity of demand for spread trading determines the speed of mean reversion and pairs‐trading profitability. A persistence‐dependent trading trigger is introduced accordingly. Applied to STOXX Europe 600–traded equities, our strategy exploits price leadership for portfolio replication purposes and delivers Sharpe ratios that outperform the benchmark rules used in the literature. Portfolio performance and mean reversion are enhanced after firm fundamental factor restrictions are imposed.