Research On ETF Trading Mechanism And Its Adjustment In China's Security Market

Following the launch of Shanghai 50 ETF,the first Exchange Traded Funds fund in China in 2004.While the international market has been booming,China's ETF market has grown rapidly;the scale and quantity of ETF market have increased substantially.Pairs trading is a kind of statistical arbitrage trading strategy.With the occurrence of securities margin trading,the short-selling mechanism has been able to operate in the Chinese capital market,making the application of statistical arbitrage strategies possible in the Chinese market,so the application of pairs trading in the Chinese market has been realized.This article uses a combination of theoretical and empirical research methods.The research content is mainly divided into five major parts.In the first chapter,this article integrates and analyzes the research results of the existing literature on pairs trading,and summarizes and describes the strategies and methods of pairs trading,after elaborating the background and significance of the research.The second chapter briefly introduces the related concepts of ETFs,elaborates the function,risk and trading system of ETF,and compares the similarities and differences between ETF and closed-end funds and open-end funds.Based on the experience of the development of foreign ETFs,we will sum up experiences that are suitable for China's national conditions and can effectively promote the development of ETFs.In the third chapter,based on the basic idea of co-integration theory and pairs trading strategy,this paper establishes two pairs trading models based on co-integration theory.Based on whether brings securities margin trading into the model,these models is different in the choice of signal mechanism and the operation of pairing.Chapter IV is empirical part,at first,we select samples in the ETF market,based on which we distinguish whether there is a co-integration relationship between the closing price series of ETFs.Then based on the error correction model,analyze the short-term deviation of the equilibrium relationship between the price series.Based on the pairs trading model above,simulate pairs trading on ETF closing price sequence.The empirical results of the two models were compared and analyze the reasons.Analyze the effect of the securities margin trading on ETF pairs trading transactions both in the risks and benefits.Finally,based on these,we improved methods of the pairs trading to increase the efficiency of the capital and control the risk.In the final chapter,we reiterated the research conclusions of this article and proposed corresponding improvement suggestions for the pairs trading of China ETF marketing and the implementation.