Empirical Research Of Pairs Trading Strategy Based On Banking Industry

The research on pairs trading strategy has a long history. Since2010, the domestic market gradually unloosening, our country have introduced margin business and stock index futures products. These two measures provided the basis for the statistical arbitrage model including the pairs trading strategy to be implemented in the Chinese financial market.Firstly this paper analysis the process of pairs trading strategy in depth and divide it mainly into three aspects, the first one is the selection of the matching stock pairs, the second one is the strategy applied to the pairs trading process, the last one is the measure of return and risk control.Then this paper use the banking stocks which are strongly homogeneous to do empirical research. We use three different frequency data,that is, the dayly data,30minutes data and1minute data to detect the optimal entry and exit boundary.The average year yield considering the transaction cost are4.11percent,6.85percent,169.27percent respectively.In addition, this paper also do the sensitivity analysis on two kinds of transaction costs, the empirical results show that the securities accommodation fee can weaken the profit of the pairs trading strategy considerably, especially for the dayly data, while the other onetime transaction cost has little influence on the whole return.