Research On The Margin Transaction Trading Strategy Based On Statistical Arbitrage

The Statistical arbitrage as an important hedging trading strategy，it has been usedon a wide range of applications in the mature capital overseas. In recent years, Chinasecurities trading mechanism changed radically. The shorting mechanism formed formally.This created the system environment for the application of all sorts of arbitrage tradingand hedge strategies in the domestic stock market. The institutional investors pursued theaim of absolute returns such as hedge funds will also arise gradually with theimprovement of the system.This article introduce the margin trading strategy based on the statistical arbitrage,and simulate the statistical arbitrage trading in securities market of China. The study foundthat listed companies of the banking industry are suitable to do pairs trading mainlybecause of the same main business, the similar external affect factors, and the good stockliquidity. We select the stocks by the correlation analysis, unit root test and cointegrationtest. and then establish statistical arbitrage trading rules.The simulation results indicate that the trading system is running well, and get verysignificant investment income, which is low correlation with market’s gains. As themargin trading belongs to new things in domestic market, the research about tradingstrategy will develop with the continuous innovation of securities market. This paperdiscuss the applicability of statistical arbitrage in our securities market and provide somesupport for the further research in the future.