Min RSS-A50&CSI300&SSE50 arb report--2017.2.20

Fang • submitted 2017-07-05 10:37:35

For there’s obvious collinearity between CSI300 and SSE50, the coefficients are in a two dimensional united distribution, which formed a curved surface with the residual sum of squares.

In the previous regression, the ridge regression had been used to calculated positive coefficients of CSI300 and SSE50 with a steady ridge trace and lessened covering effect of SSE50 on CSI300, with CSI300 : SSE50 = 3:5.

Further constraints had been added to calculate small residual sum of squares and neutralized the portfolio.

The constrains are as below:( We set the data range from 2016/1/15—2016/12/30 )

Regression on these constrains:

The residual sum of squares reached the minimum when a is at 0.032.

We observed the change of RSS when a is around 3.2:

1、 e<-3*csi300+5*sse50-100*a50 （residual is negative）

2、 e<-3.3*csi300+5.5*sse50-100*a50 (residual is positive)

3、 e<-3.2*csi300+5.3*sse50-100*a50 （residual is neutralized）

We set coefficients for case 3 to integers by dividing 1.06:

4、e<-3*csi300+5*sse50-94*a50（residual neutralized）

Simulation trading with Average Reverse Strategy generated result with N=10, T=60:

Copyright by FangQuant.com

Disclaimer: The information on this website is for general informational purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security, currency, investment, service or to attract any funds or deposits. Save to the extent provided otherwise in the Terms and Conditions for Accounts and Services or other applicable terms and conditions, information in this website has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Therefore, investment products mentioned in this website may not be suitable for all investors. Any person considering an investment should seek independent advice on the suitability or otherwise of a particular investment. Before making any investment, each investor must obtain the investment offering materials, which include a description of the risks, fees and expenses and the performance history, if any, which may be considered in connection with making an investment decision. Each investor should carefully consider the risks associated with the investment and make a determination based upon the investor’s own particular circumstances, that the investment is consistent with the investor’s investment objectives.

Currently no Comments.

author: Fang

Hot Topics

The 13rd China International Future Forum Financial institutions deep explore commodity market opportunities, commodity index financial products show full-scale trend The Shanghai Derivatives Energy Forum has received extensive attention from relevant industries both within and outside the borders. New indicator to analyze the arbitrage opportunities between sse50 and csi500 The Great China Bubble: Anniversary Lessons and Outlook Market review: January 11, 2017 R-Code for analysis: getKDJ Sleepless in London--Enda Homan(Allied Irish Banks Plc) The hedge strategy between SSE50 and A50--Jan 13,2017 The arbitraging strategy between CSI300 and SSE50 MSCI Rebuffs Chinese Equities for Third Time in Blow to Xi R-Code@June 06, 2016 Quant Investment in China A-share market Soros, Druckenmiller among hedgies profiting in market plunge Market review: June 17, 2016

Links

Contact Me: sherry_ustc@163.com