Study On Effectiveness Of Program Trading Strategies In China Stock Index Futures Market Based On High-frequency Data

Program trading has been widely used in international market as an importantway of trading. However, the development of China’s program trading is still in a lowlevel. The emergence of the CSI300stock index futures offers a good opportunity forChina’s program trading. The mainly work of this paper is finding out theeffectiveness of using program trading strategies in CSI300index futures forlong-term continuous.In this paper, there are two aspects of program trading strategies, arbitrage tradingand speculative trading. For arbitrage, we focus on spread arbitrage strategy, andspeculative trading strategy is based on moving average convergence/divergence(MACD) indicator. According to the theories of spread arbitrage and MACDindicators, feasible trading strategies in actual transaction was designed, and thegenetic algorithm has been used for optimizing the strategies. Based on the optimizedstrategies, a simulated trading system was built and then applied in simulating tradingstrategies. Finally, we discussed the profits of different strategies, the effectiveness ofstrategies for continuous trading and which factors might affect profits.The results show that, for standing and continuous trades in the CSI300futuresmarket, spread arbitrage strategy can get a low-risk and stable profits. To date, there isstill a large space for arbitrage in stock index futures markets, however, the chancesare gradually decrease with time goes on. In the perspective of the factors whichaffect the spread arbitrage strategy, the absolute value of the residuals, which arebetween two co-integration equations of contracts, has a negative impact for spreadarbitrage profits. In addition, the maximum fluctuation of two contracts spread has apositive impact for the strategy profits. The cumulative gain profits curve of thestrategy, which is based on the MACD in the long-term investment, is M-shaped. Itindicates that this strategy has valid interval and invalid interval obviously. In otherwords, there is no faultless speculative strategy which could keep a stable profit inlong-term continuous trading. When the movement of market price is a strongunilateral movement, the profits of MACD strategy have significant differences withthe others, and the profits are significantly less than0. The difference between themaximum fluctuate and the actual fluctuate in a trading day has positively correlatedwith profits.