After reading this paper I tried to replicate it. I almost done, but I am stuck on the section 3.6 where the author constructs a random pair (how he constructs this?) for Assessing Pairs Trading Performance by using a Bootstrap Method.
"In particular, we conduct a bootstrap where we compare the performance of our pairs to random pairs. The starting point of the bootstrap is the set of historical dates on which the various pairs open. In each bootstrap we replace the actual stocks with two random securities with similar prior one-month returns as the stocks in the actual pair. Similarity is defined as coming from the same decile of previous month's performance. The difference between the actual and the simulated pairs returns provides an indication of the portion of our pairs return that is not due to reversion. We bootstrapped the entire set of trading dates 200 times."
I trully apreciate a help.
There is Any other way to assess the performance of a pairs trading strategy?