Gatev, Evan; Goetzmann, William N.; Rouwenhorst, K. Geert - In: Review of Financial Studies 19 (2006) 3, pp. 797-827
We test a Wall Street investment strategy, "pairs trading," with daily data over 1962--2002. Stocks are matched into pairs with minimum distance between normalized historical prices. A simple trading rule yields average annualized excess returns of up to 11% for self-financing portfolios of...