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I was going through the paper of Avellaneda (2008) on stat arb and I found it interesting that he uses asset returns vs. their respective ETFs to compute the s-score.

I am wondering if anyone has tried this approach to pairs trading. How does it compare to Johansen's method, where the actual price series is used?

I can't imagine this approach being stable if trying to trade intraday, due to all these return computations.

I haven't tried either method so I would appreciate some feedback on your experience.

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Didn't Avellaneda write a seminal paper on stat-arb pair-trading using the s-score some 10+ years ago? I'll see if I can find it – Quant Guy Jan 6 '12 at 2:55
Not sure. This 2008 paper talks about using s-scores as well. – silencer Jan 6 '12 at 3:01
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Could you please make complete sentences and modify your title such that is becomes a question? It would contribute to the overall quality of the site. – SRKX♦ Jan 6 '12 at 8:51
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Which Johansen paper are you referring to? – Tal Fishman Jan 6 '12 at 14:25
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If you're going to cross-post, please at least disclose that you have. – Joshua Ulrich Jan 6 '12 at 14:59
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