This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the quot;joint hypothesisquot; dilemma of traditional market efficiency tests because...

We improve upon the power of the statistical arbitrage test in Hogan, Jarrow, Teo, and Warachka (2004). Our methodology also allows for the evaluation of return anomalies under weaker assumptions. We then compare strategies based on their convergence rates to arbitrage and identify strategies...

We evaluate the relative performance of funds by conditioning their returns on the cross-section of portfolio characteristics across fund managers. Our implied procedure circumvents the need to specify benchmark returns or peer funds. Instead, fund-specific benchmarks for measuring selection and...

We evaluate the relative performance of funds by conditioning their returns on the cross-section of portfolio characteristics across fund managers. Our implied procedure circumvents the need to specify benchmark returns or peer funds. Instead, fund-specific benchmarks for measuring selection and...

This paper develops robust tests of market efficiency using statistical arbitrage which circumvent the joint-hypotheses dilemma confounding the traditional literature. Hogan, Jarrow, Teo and Warachka (2004) identify statistical arbitrage opportunities in momentum and value strategies. However,...