Research Article of Journal of Modern Economy
A Note on Statistical Arbitrage and Long Term market Eﬃciency
Mario Maggi1 and Pierpaolo Uberti2
1Department of Economics and Management, University of Pavia, via S. Felice, 5, 27100, Pavia, Italy
2DIEC Department of Economics, University of Genova, via Vivaldi, 5, 16126, Genova, Italy.
Market eﬃciency is a central topic in ﬁnance. The notion of statistical arbitrage is a suitable instrument to investigate market eﬃciency without the need to specify an equilibrium model. We introduce a new deﬁnition of statistical arbitrage (named Strong Statistical Arbitrage, SSA in the following) modifying the original deﬁnition in an apparently inﬁnitesimal way. We show that some simple investment strategies, recognized as statistical arbitrages by the standard deﬁnition, do not test positive for SSA. We discuss the relations between the proposed deﬁnition and common deﬁnitions of arbitrage and prove that SSA is compatible with deviations from market eﬃciency in a “short term frame.” The idea is that if market anomalies are small, the markets do not deviate signiﬁcantly from eﬃciency, while an SSA requires time persistent anomalies on asset prices.
Keywords: Statistical Arbitrage, Market Eﬃciency
How to cite this article:
Mario Maggi and Pierpaolo Uberti. A Note on Statistical Arbitrage and Long Term market Eﬃciency. Journal of Modern Economy, 2019,2:8. DOI: 10.28933/jme-2019-05-0706
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