Investment in the form of shares, or commonly called stock investment is the purchase or participation or ownership of shares of other companies with the aim of obtaining profits and others. Profit is obtained from the share of dividends distributed according to the participation of capital or...

We study the theoretical implications of cointegrated stock prices on the profitability of pairs trading strategies. If stock returns are fairly weakly correlated across time, cointegration implies very high Sharpe ratios. To the extent that the theoretical Sharpe ratios are "too large," this...