Optimal portfolios with a restriction on the number of assets, also referred to as cardinality-constrained portfolios, have been receiving attention in the literature due to its popularity among market practitioners and retail investors. In most cases, however, the interest is in proposing...

We propose an alternative investment strategy for pairs trading using Archimedean copulas in order to cover a wider range of tail dependence patterns and apply it to the S&P 500 stocks from 1990 to 2015. Empirical results show that our mixed copula approach generates higher average and risk...