Developing Pairs Trading Rules for Arbitrage Investment Strategy based on the Price Ratios of Stock Index Futures

• 발행기관: 한국산업경영시스템학회
• 저자명: 김영민(Young Min Kim) 김정수(Jung su Kim) 이석준(Suk Jun Lee)
• 간행물 정보: 『산업경영시스템학회지』제37권 제4호, 202~211쪽, 전체 9쪽
• 주제분류: 경제경영 > 경영학
• 파일형태: PDF
• 발행일자: 2014.12.31

영문 초록

Pairs trading is a type of arbitrage investment strategy that buys an underpriced security and simultaneously sells an overpriced security. Since the 1980s, investors have recognized pairs trading as a promising arbitrage strategy that pursues absolute returns rather than relative profits. Thus, individual and institutional traders, as well as hedge fund traders in the financial markets, have an interest in developing a pairs trading strategy. This study proposes pairs trading rules (PTRs) created from a price ratio between securities (i.e., stock index futures) using rough set analysis. The price ratio involves calculating the closing price of one security and dividing it by the closing price of another security and generating Buy or Sell signals according to whether the ratio is increasing or decreasing. In this empirical study, we generate PTRs through rough set analysis applied to various technical indicators derived from the price ratio between KOSPI 200 and S&P 500 index futures. The proposed trading rules for pairs trading indicate high profits in the futures market.

목차

Abstract

1. Introduction

2. Research Background

3. Generation of PTRs

4. Empirical Study

5. Concluding Remarks

References

키워드

Pairs Trading Arbitrage Investment Strategy Price Ratio Rough Set Analysis Stock Index Futures