Bondarenko, Oleg - In: Review of Financial Studies 16 (2003) 3, pp. 875-919
This article introduces the concept of a statistical arbitrage opportunity (SAO). In a finite-horizon economy, a SAO is a zero-cost trading strategy for which (i) the expected payoff is positive, and (ii) the conditional expected payoff in each final state of the economy is nonnegative. Unlike a...