Asset Trading Strategies Based On Mean Reversion Process And Empirical Aanlysis

Since the 1970 s,Eugene Fama put forward the efficient market theory,we rise the tide of studying trading strategies,especially based on mean reversion trading assets,including single-asset trading and pairs trading.Making asset pricing reasonably in a perfect market,the single-asset trading and pairs trading strategy are even more important.In fact,based on the idea of a single asset mean reversion,single-asset trading and pairs trading are very simple.Based on mean reversion of single-asset trading is that a single asset price fluctuates around its historical average,if the current price of the single asset is a certain degree higher than the historical average price,you can short the single-asset,and vice versa.And based on the mean reversion of the pairs trading strategy emphasizes the two assets pairing.The price margin of pairing assets will fluctuate around the historical average price margin.If the current matching assets deviate from the historical average spread to a certain extent,you can sell a higher valuation of assets while buying lower valuation of assets,when paired assets converges near its historical average spread,then we can close our position.Firstly,this paper introduces the single-asset transactions around the mean price of random fluctuations.Continuous investment targets were to buy and sell to make the discount yield maximization.Here we will consider every transaction of transaction cost,and assuming the transaction costs in order to receive a fixed percentage of the principal amount.We study the value of the function when the threshold of algebraic equations obtained positions through dynamic optimization methods that give the optimal trading strategies.Secondly,this paper introduces the empirical research of pairs trading,and for the traditional standard strategies proposed the following three improvement strategies:a)Pairing multiple positions trading strategyb)Delayed opening pairs trading strategyc)Packaging asset pool pairs trading strategyBy contrast with the traditional pairs trading,the proposed strategy is proved its effectiveness.