In the pairs trade we are betting that the spread between, Ask an Expert

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In the pairs trade we are betting that the spread between two stocks’ cumulative returns:

a. has no memory, i.e. the spread on day t has no bearing on the spread on day t + n for n > 0.

b. generally tends to widen over time.

c. behaves like a geometric Brownian motion.

d. tends to revert to some mean spread.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92312506

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