On The Feasibility Testing And Arbitrage Signals Of Statistical Arbitrage In Chinese Stock Market

Statistical arbitrage is a quantitative investment strategy based on statistical models.lt is rely on short mechanism. China stock market on March 31,2010 official launched margin trading business to achieve statistical arbitrage possibilities. Statistical arbitrage in foreign capital market is already a mature method, has become a common strategy of institutional investors.China’s stock market has been shown to use statistical arbitrage strategy. There are two main categories about the volatility of financial time series model at present:The ARCH model and SV model. Study of SV model in statistical arbitrage is not a lot, GARCH model and the SV model are proved by the actual data whether the Chinese stock market to achieve statistical arbitrage in this paper. Simulation results and actual profitability are compared in this paper.Pair trading strategy based on cointegration theory is adopted in this paper. Simple standard deviation and time varying standard deviation are uesd to determine transaction signal and stop signal.Time varying standard deviation by using the GARCH model and SV model to simulate and to compare GARCH model and SV model’s ability to depict the financial time series. Margin trading stock of banking sector is used to empirical analysis, test and statistical arbitrage strategy model fitting effect in the actual profitability of China’s stock market, test model fitting effect and the actual profitability of statistical arbitrage strategy in Chinese stock market. The empirical results shows that three methods have stable earnings, and SV model of the fitting effect for time varying standard deviation is better than GARCH model.