Artikel
Statistical arbitrage with mean-reverting overnight price gaps on high-frequency data of the S&P 500
This paper develops a fully-fledged statistical arbitrage strategy based on a mean-reverting jump-diffusion model and applies it to high-frequency data of the S&P 500 constituents from January 1998-December 2015. In particular, the established stock selection and trading framework identifies overnight price gaps based on an advanced jump test procedure and exploits temporary market anomalies during the first minutes of a trading day. The existence of the assumed mean-reverting property is confirmed by a preliminary analysis of the S&P 500 index; this characteristic is particularly significant 120 min after market opening. In the empirical back-testing study, the strategy delivers statistically- and economically-significant returns of 51.47 percent p.a.and an annualized Sharpe ratio of 2.38 after transaction costs. We benchmarked our trading algorithm against existing quantitative strategies from the same research area and found its performance superior in a multitude of risk-return characteristics. Finally, a deep dive analysis shows that our results are consistently profitable and robust against drawdowns, even in recent years.
- Language
-
Englisch
- Bibliographic citation
-
Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 12 ; Year: 2019 ; Issue: 2 ; Pages: 1-19 ; Basel: MDPI
- Classification
-
Wirtschaft
- Subject
-
computational finance
asset pricing models
overnight price gaps
financial econometrics
mean-reversion
statistical arbitrage
high-frequency data
jump-diffusion model
- Event
-
Geistige Schöpfung
- (who)
-
Stübinger, Johannes
Schneider, Lucas
- Event
-
Veröffentlichung
- (who)
-
MDPI
- (where)
-
Basel
- (when)
-
2019
- DOI
-
doi:10.3390/jrfm12020051
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Stübinger, Johannes
- Schneider, Lucas
- MDPI
Time of origin
- 2019
Other Objects (12)
Statistical Arbitrage with Mean-Reverting Overnight Price Gaps on High-Frequency Data of the S&P 500
Time-discrete hedging of down-and-out puts with overnight trading gaps
Overnight
Optimality and diversifiability of mean variance and arbitrage pricing portfolios
Information Flows around the Globe: Predicting Opening Gaps from Overnight Foreign Stock Price Patterns
Overnight Stay/Übernachtung
The overnight drift
High-frequency tinnitus without hearing loss does not mean absence of deafferentation
Arbitrage
Pairs trading with a mean-reverting jump-diffusion model on high-frequency data
Reducing parent-school information gaps and improving education outcomes: Evidence from high-frequency text messages
Staatliche Arbitrage
Statistical Arbitrage with Mean-Reverting Overnight Price Gaps on High-Frequency Data of the S&P 500
Time-discrete hedging of down-and-out puts with overnight trading gaps
Overnight
Optimality and diversifiability of mean variance and arbitrage pricing portfolios
Information Flows around the Globe: Predicting Opening Gaps from Overnight Foreign Stock Price Patterns
Overnight Stay/Übernachtung
The overnight drift
High-frequency tinnitus without hearing loss does not mean absence of deafferentation
Arbitrage
Pairs trading with a mean-reverting jump-diffusion model on high-frequency data
Reducing parent-school information gaps and improving education outcomes: Evidence from high-frequency text messages
Staatliche Arbitrage
Statistical Arbitrage with Mean-Reverting Overnight Price Gaps on High-Frequency Data of the S&P 500
Time-discrete hedging of down-and-out puts with overnight trading gaps
Overnight
Optimality and diversifiability of mean variance and arbitrage pricing portfolios
Information Flows around the Globe: Predicting Opening Gaps from Overnight Foreign Stock Price Patterns
Overnight Stay/Übernachtung
The overnight drift
High-frequency tinnitus without hearing loss does not mean absence of deafferentation
Arbitrage
Pairs trading with a mean-reverting jump-diffusion model on high-frequency data
Reducing parent-school information gaps and improving education outcomes: Evidence from high-frequency text messages