Research On Pairs Trading Of Bank Stocks In A-share Market With High-frequency Data

Since Alfred Winslow Jones set up the first hedge fund in 1949, hedge funds have recently been for 70 years. Compared with other countries, China’s hedge funds have just started and the research on hedge investment strategy was not efficient.We discussed the feasibility of pair trading strategy in the Chinese stocks market and analyzed pairs trading ideological foundation from the perspective of human cognitive psychology and group psychology. The limitations of human cognition, cognitive biases and information transmission attenuation effect are causing excessive volatility of stock prices. At the same time, we applied Soros’s theory to come up with a function that affects the pairs trading stock price. Besides, based on the cointegration theory,we used daily data and high-frequency data of Chinese bank stocks to study pairs trading strategy. The results showed that pairs trading strategy in Chinese stocks market is efficient, while reflecting the securities market are non-efficient in China. Using high frequency data can help to discover more trading opportunities, while increasing the transaction costs and expenses. We should make the best choice.