This is a summary of links featured on Quantocracy on Tuesday, 06/22/2021. To see our most recent links, visit the Quant Mashup. Read on readers!
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Pairs Trading with Stochastic Control and OU process [Hudson and Thames]The concept of pairs trading is pretty straightforward. As described in [Gatev et al. (2006)], we first find two stocks that have moved together historically and then monitor the spread between these stocks. If the prices of the two stocks diverge, we short the winner and go long on the loser, hoping that these prices converge in the future. If the spread is mean reverting, it will revert to its
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Private Equity: Is There Anything Special There? [Alpha Architect]As the following table demonstrates, since its inception in the 1970s, the private equity industry has grown significantly. According to Preqin data, there are now more than 18,000 private equity funds, with assets under management exceeding $4 trillion. Source: NACUBO endowment studies, FY 1987-2019 When deciding on whether to allocate capital to private equity, investors should consider whether