Wei Liu. Research on HFT Statistical Arbitrage Strategy Based on Cointegration Test – An Example in Shanghai Futures Exchange Copper Futures Contracts. Dynamic Systems and Applications 29 (2020) No. 11, 3145 – 3156

https://doi.org/10.46719/dsa202029113

ABSTRACT.
Statistical arbitrage strategy is widely used in developed capital markets abroad. With short-mechanism gradual improvement and the futures market increasing optimism, it is very urgent to study the effect of this technology used in high-frequency trading of China futures market. Based on the domestic futures market, the paper uses the co-integration test method, constructs the GARCH mathematical model, and provides a high-frequency statistical arbitrage strategy. By selecting the transaction object, constructing portfolio, and determine the stop-loss trading rules, the strategy shows the specific operation method of inter-temporal arbitrage, which makes the beneficial exploration of high-frequency trading model in the futures market. In the application of the strategy, the paper uses Shanghai Futures Exchange copper CU2001 and CU2002 contract. The empirical analysis results show that the daily average yield of established strategy is about 13.8415%. We can draw a conclusion that statistical arbitrage strategy is effective in the futures market in China, and its benefits are considerable. It is conducive to the healthy development of the futures market and the promotion and application of program trading.

Keywords: High-frequency Data, Arbitrage Strategy, GARCH Model, Co-integration.