文档介绍：Testing Market Efficiency using Statistical
Arbitrage with Applications to Momentum and
Value Strategies
S. Hogana, R. Jarrowb, M. Teoc*, M. Warachkad
aCredit Suisse First Boston.
bJohnson Graduate School of Management, Cornell.
cSingapore Management University and FDO Partners LLC.
dSingapore Management University.
This Draft: September 2003
Abstract
This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity
that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage
circumvents the joint hypothesis dilemma of traditional market efficiency tests because its
definition is independent of any equilibrium model and its existence is patible with market
efficiency. We provide a methodology to test for statistical arbitrage and then empirically
investigate whether momentum and value trading strategies constitute statistical arbitrage
opportunities. Despite adjusting for transaction costs, the influence of small stocks, margin
requirements, liquidity buffers for the marking-to-market of short-sales, and higher borrowing
rates, we find evidence that these strategies generate statistical arbitrage. Furthermore, their
profitability does not appear to decline over time.
JEL classification: G12; G14
Keywords: Statistical arbitrage; market efficiency; momentum; value
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*Corresponding author: Address: 168 Mt Auburn St, Cambridge MA 02138. Tel: 617-234-9464.
Fax: 617-234-9478. E-mail address: melvynteo@
We thank Warren Bailey, Amiyatosh Purnanandam, Bill Schwert, Yiu-Kuen Tse, David
Weinbaum, seminar participants at Cornell and the Singapore Management University, and an
anonymous referee for many ments and suggestions. M. Warachka is grateful for
financial support from the Wharton-SMU Research Center, Singapore Management University.
Credit Suisse First Boston doe