What is the concept of "pairs arbitrage" and how does it relate to mean reversion?

May 30, 2014 ... Investors see these past growth rates, and extrapolate them into the future through their own buying and selling, which is why growth stocks are ... The author provides an economic model that explains more than 90% of the CAPE ratio's variability. A link between the economy and CAPE is useful in investment ... Jan 31, 2024 ... Mean reversion is a theory or concept used by traders and investors to time strategies. It suggests that, over time, prices will move toward a long-term ... Equity indices exhibit mean reversion in daily returns. A simple and powerful way to capture this effect is the Internal Bar Strength technical indicator, which ... In this article we are going to outline the statistical tests necessary to identify mean reversion. In particular, we will study the concept of stationarity ... Nov 1, 1988 ... We examine this finding with a series of Monte Carlo simulations in order to demonstrate that it is consistent with an equilibrium model of asset pricing. The strategy is to take advantage of divergences in the stock prices of the pair, where one stock moves up while the other moves down. When this occurs, a pairs ... Oct 8, 2019 ... We slightly adjusted our mean-reversion rate model to better reflect these prices swings on the gas market. The Financial Accounting Standards Board guidelines require institutions to revert to their historical losses beyond the reasonable and supportable forecast ... Luis M. Viceira · Stock Market Mean Reversion and the Optimal Equity Allocation of a Long-Lived Investor. Citation: John Campbell, Joao Cocco, Francisco Gomes, ...