Study On Pairs Trading Strategy Under The Mechanism Of Margin Trading

With today’s capital markets developing worldwide, a variety of derivatives and investment strategies are created, pairs trading, as an important method of statistical arbitrage in foreign mature capital markets, is widely used and studied by investors. As our country market becomes mature and margin trading is permitted, age of short has arrived. Pairs trading will shine in the future market. On this basis, the paper selected 500 data samples from April 1st, 2013 to September 30 th, which is the third expansion of underlying stocks since the margin trading opened, using two different strategies, researching pairs trading feasibility and profitability while analyzing the trend of pairs trading after margin opened from the industry perspective.This paper classified stocks by industry, then used correlation coefficient, the unit root test, the least squares method and the co-integration test and other econometric models to create equity pool, to select and finalize the trading pairs. According to the specific circumstances, writer used classical pairs trading strategy and cream skimming strategy, analyzed feasibility and profit of China’s securities market since the launch of margin trading by transactions, success index rate, average income, daily yield and comprehensively analyzed the pros and cons of two pairs trading strategies, and analyzed the results of different industries pairs trading to investors to provide references and recommendations.Empirical evidence shows that: the two pairs trading strategies have considerable numbers of transactions, a high success rate, suggesting that investors can take advantage of direct eligible for matching transactions. The classic strategy average income is higher, longer holding period for investors to choose long-term profitability; cream skimming strategies shows higher average daily income, kept positions a short time, for short-term investors looking for a flexible high-yield, in short positions in the period of the funds for other investment activities. Also found that banking and securities get lower income, beverage manufacturing, construction and other industries gains higher income, which gave investors suggestions.This paper studies the development of the margin trading history and related policies and the establishment of a mechanism under margin trading model, there is a certain degree of innovation; short-term profits from the perspective of a new type of cream skimming strategy, found another species pairs trading ideas, there are some empirical meaning and guidance meaning.