article, we perform a sensitivity analysis of the pairs trading profitability to its parametrization, employing the daily …

) Intertemporal CAPM (ICAPM) framework. Factors associated with alternative profitability measures forecast the equity premium in a … market volatility, thus being consistent with their positive prices of risk. The investment-based factors are also strong … with state variables that are more correlated with future investment opportunities or economic activity. Moreover, these …