Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
6898874 | European Journal of Operational Research | 2010 | 15 Pages |
Abstract
Pairs trading is a popular speculation strategy. Several implementation methods are proposed in the literature: they can be based on a distance criterion or on co-integration. This article extends previous research in another direction: the combination of forecasting techniques (Neural Networks) and multi-criteria decision making methods (Electre III). The key contribution of this paper is the introduction of multi-step-ahead forecasts. It leads to major changes in the trading system and raises new empirical and methodological questions. The results of an application based on S&P 100 Index stocks are promising: this methodology could be a powerful tool for pairs selection in a highly non-linear environment.
Keywords
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Nicolas Huck,