Research On The Correlation Of Index Combination With Copula Approach

Quantitative investment is to make investment decision by using mathematical orquantitative method. After30years of development, quantitative investment has beenrecognized and favored by many investors in the foreign markets. Technical index as atool to make stock investment has been developed for several years, and is popular amonga great number of investors.This paper adopted the daily data of China Shanghai Composite Index between January1,2007and December31,2010. By the method of descriptive statistical, we found out theorderliness of really buying timing and selling timing of individual technical index and theeffect of time window on the really buying and selling timing. We concluded that we canimprove the probability of the real signals of buying and selling timing by parameteroptimization and then improve the investment return of individual index, and pointed outthat time window optimization is important for technical index. We then studied the timeinterval between really buying and selling of combination of any two index, we found theindex combination with the most real signals. The non-linear correlation of history seriescalculated by Copula function is very high, and then we construct investment strategy basedon Copula functions. We also use the daily trading data of all Chinese A-shares to verify thatthe investment strategy can enable investors to obtain substantial excess returns and beat themarket. We analyse the phenomenon of industry wheel in the A-shares market by theinvestment strategy that we establish aforementioned.The main work of this paper: find out that the real buying timing and selling timing ispositively related to historical return series through the statistical study of buying and sellingtiming of technical index; proposed the necessity and method of index parameter optimizationby test the real and fake signals under different parameters; use Copula function to describethe correlation between historical series and then make investment strategy, which extend theuse of Copula technology; We analyse the phenomenon of industry wheel in the A-sharesmarket by the investment strategy that we establish aforementioned.