Research On A-H Stock Arbitrage Pairs Trading Strategy

After the opening of Shenzhen-Hong Kong Stock Connect at the end of 2016,the linkage between A-shares and H-shares increased,and arbitrage opportunities decreased.There is doubt as to whether the pairs trading strategy is still valid in the A-H share market.Based on the theory of pairs trading and the theory of cointegration,this paper designs a model of pairs trading.The data from 2016 to 2018 will be divided into training sets and test sets.The data of the test data will be used to match the 104 sets of AH stocks listed in the Ashare market and the H-share market for cointegration test to find out the cointegration.Good stock,determine the OLS regression coefficient and the threshold.Then,through the obtained regression coefficient and threshold,the test set data is tested and verified by the pairs trading strategy.The innovation of this paper is that the previous research on pairs trading is generally based on two stocks in the same market,and in this paper we use the A-H stocks listed on both two stock market of China.In addition,the previous research is based on the data before the opening of Shanghai-Hong Kong Stock Connect,this article uses the latest data.From the results of the empirical test in Chapter 4,we can see that after the dual-listed stocks in the A-H stock market were opened in Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect,the pairs trading strategy is still arbitrable,and the results and benefits.They are all quite impressive.At the same time,this paper also demonstrates that there is a strong cointegration between the A-stock and H-stock pairs.The coefficient trained by the training set can be used to verify that the return of the pairs trading is relatively stable.Pairs trading is a market neutral strategy,especially in the bear market,can have a relatively smooth return.At the end of the paper,the opening time of the original pairs trading strategy was improved,and the time for opening the position was delayed.The verified strategy proved that the improved strategy failed to improve the profit rate as expected,but the maximum retracement.The rate has been significantly reduced,greatly reducing the risk of the strategy.In the research of this paper,we also use Python language to develop a strategy backtesting platform,which can obtain Hong Kong stock data and support the operation of short selling.The platform fully simulates the opening and closing of stock operations and considers the transaction cost per transaction.