Research On The Improvement Of Pairs Trading Strategy Of Stock Based On PCA-SVM Model

Pairs trading strategy evolved from sister stock trading strategy,It is originated from the 20 time of 20 centuries.pairs trading strategy is widely used in stock trading,and it is also a common hedge strategy used by hedge funds in Europe and the United States.The development of pairs trading strategy in China began with the pilot of margin trading in 2008,and most domestic securities institutions studied the strategy after 2008.Due to the pairs trading strategy needs to be carried out in the market with short mechanism,the strategy was introduced only after China launched margin trading business.However,the pairs trading strategy through margin trading business will increase the transaction cost and reduce the profit of the strategy.Therefore,the main purpose of this thesis is to improve the traditional stock pairs trading strategy and improve the applicability of the stock pairs trading strategy in China's stock market.Firstly,this thesis analyzes the current situation of the application of the traditional stock pairs trading strategy and its shortcomings in the trading mode and stock pool selection when it is applied to the stock market in China;Secondly,aiming at solving the shortcomings of these two aspects,This thesis improves the trading mode and stock pool screening method of the traditional stock pairs trading strategy,and constructs the improved model of the stock pairs trading strategy and design the trading process.In the aspect of improving the trading mode,I adopt the way of holding stock in the stationary period of the two stocks' residual sequence to build the short environment of the stock,in order to realize the direct application of the pairs trading strategy in the stock market of our country.In the aspect of stock pool improvement,through constructing PCA-SVM model to screen stock pool,the stock pool under industry classification is further divided to improve the quality of stock pool screening and increase the maneuverability of stock pairs trading strategy.According to the designed trading flow,32 financial indexes were selected from 8 aspects of 16 bank stocks,and do the back test with the stock pairs trading strategy based on PCA-SVM model using the platform of joinquant quantification.Finally,according to the results of theoretical analysis and empirical analysis,the thesis puts forward some suggestions on the improvement of the stock pairs trading strategy from three aspects:the analysis of the process of strengthening the trading process of stock pairs trading strategy,improving the stock pool screening quality and Optimizing the parameters of stock pairs trading strategy.