000162247 001__ 162247
000162247 005__ 20251017144653.0
000162247 0247_ $$2doi$$a10.3390/ijfs13020096
000162247 0248_ $$2sideral$$a144763
000162247 037__ $$aART-2025-144763
000162247 041__ $$aeng
000162247 100__ $$aGarcía-Risueño, Pablo
000162247 245__ $$aThe Effect of Fat Tails on Rules for Optimal Pairs Trading: Performance Implications of Regime Switching with Poisson Events
000162247 260__ $$c2025
000162247 5060_ $$aAccess copy available to the general public$$fUnrestricted
000162247 5203_ $$aThis study examines the impact that fat-tailed distributions of the spread residuals have on the optimal orders for pairs trading of stocks and cryptocurrencies. Using daily data from selected pairs, the spread dynamics has been modeled through a mean-reverting Ornstein–Uhlenbeck process and investigates how deviations from normality affect strategy design and profitability. Specifically, we compared four fat-tailed distributions—Lévy stable, generalized hyperbolic, Johnson’s SU, and non-centered Student’s t—and showed how they modify optimal entry and exit thresholds, and performance metrics. The main findings reveal that the proposed pairs trading strategy correctly captures some key stylized facts of residual spreads such as large jumps, skewness, and excess Kurtosis. Interestingly, we considered regime-switching behaviors to account for structural changes in market dynamics, providing empirical evidence that optimal trading rules are regime-dependent and significantly influenced by the residual distribution’s tail behavior. Unlike conventional approaches, we optimized the entry signal and link heavy tails not only to volatility clustering but also to the nonlinearity in switching regimes. These findings suggest the need to account for distributional properties and dynamic regimes when designing robust pairs trading strategies, providing a more realistic and effective framework of these strategies in highly volatile and non-normal markets.
000162247 536__ $$9info:eu-repo/grantAgreement/ES/AEI/PID2023-146084OB-I00$$9info:eu-repo/grantAgreement/ES/DGA/S33-20R
000162247 540__ $$9info:eu-repo/semantics/openAccess$$aby$$uhttps://creativecommons.org/licenses/by/4.0/deed.es
000162247 655_4 $$ainfo:eu-repo/semantics/article$$vinfo:eu-repo/semantics/publishedVersion
000162247 700__ $$0(orcid)0000-0001-5582-3694$$aOrtas, Eduardo$$uUniversidad de Zaragoza
000162247 700__ $$0(orcid)0000-0003-1619-8042$$aMoneva, José M.$$uUniversidad de Zaragoza
000162247 7102_ $$14002$$2230$$aUniversidad de Zaragoza$$bDpto. Contabilidad y Finanzas$$cÁrea Economía Finan. y Contab.
000162247 773__ $$g13, 2 (2025), 96 [24 pp.]$$tInternational Journal of Financial Studies$$x2227-7072
000162247 8564_ $$s2245383$$uhttps://zaguan.unizar.es/record/162247/files/texto_completo.pdf$$yVersión publicada
000162247 8564_ $$s2759184$$uhttps://zaguan.unizar.es/record/162247/files/texto_completo.jpg?subformat=icon$$xicon$$yVersión publicada
000162247 909CO $$ooai:zaguan.unizar.es:162247$$particulos$$pdriver
000162247 951__ $$a2025-10-17-14:37:20
000162247 980__ $$aARTICLE