Stat Arb?

[yandong]

Hello,

Could anyone give me advice on materials/books/articles about Statistical Arbitrage?

My understanding of it is that you long/short a basket of hundred of stocks, doing high frequent trading to make sure that all the risk factors(which may be very subjective) are close to 0... Is that true?... I reli don't quite understand... why that's an "ARB"?

Thanks!

 

[bob]

I think it's a good question. I interviewed with two different stat arb groups in fall 2007. At one of the interviews I outright asked, "Isn't statistical arbitrage a contradiction in terms?"

Needless to say, they were a little touchy about that, since August that year had brought the first big market hiccup preparatory to the vast heaving disgorgement to follow. And no, I didn't get a straight answer in either interview.

Your question prompted me to go looking, and it seems at though Richard Bookstaber's book A Demon of Our Own Design would be an interesting book on the topic. In fact, I think I'll put it on my reading list.