Sterge explains stat arb slump


Andrew Sterge, chairman and CEO at CooperNeff Advisors Inc. of King of Prussia, Penn., has produced some fascinating insights into why statistical arbitrage strategies have been finding it increasingly difficult to perform in the past couple of years.

In a presentation at the recent GAIM meeting in Geneva in June, Sterge homed in on several key factors that have curtailed the returns from stat arb. In particular, he highlighted the weight of money now chasing the same alpha opportunities, the seemingly ever faster rate of mean reversion, and the impact of decimalization in the U.S. and tighter dealing spreads