15 u(g,) No.

5
2013 c 9  Journal of East China Normal University (Natural Science) Sep. 2013

?: 1000-5641(2013)05-0144-08

I| ETF @|
, 7, xS
(u 7KO, 200241)

: kJ
]md'X#.ax (t)Xt ay (t)Yt = mt + st t ,
Xt Yt L]3 t d, ax (t) ay (t) L]X, mt L
, st LIO, t IOz. X ax (t) ay (t) , st
mt , .zC.. , u#., J

|^L {t } ?1@|p{, d{A^I|65rn

ETF(Exchange Traded Fund) 7, ?1@|, p~
n.
'c: p; O@|; L
a: O213, O211.9 zI: A DOI: 10.3969/j.issn.1000-5641.2013.05.018

ETF arbitrage research on China financial markets

CHEN Shi, WU Shu-jin, ZHENG Wei-an

(School of Finance and Statistics, East China Normal University, Shanghai 200241, China)

Abstract: This paper first proposed a new model to describe the relationship between
two paired asset prices: ax (t)Xt ay (t)Yt = mt + st t , where Xt and Yt denote the prices
of two paired financial assets at time t, ax (t) and ay (t) the matching coefficients, mt the
long-term trend, st the standard deviation of residual, and t the standardized residual.
When ax (t), ay (t), mt and st are constants, the model is reduced to a kind of two-variable
cointegration model. Based on this new model, the paper proposed a statistical arbitrage
method for high-frequency trading using the stationary process {t }. As its application,
this method was used on three major ETFs in China financial markets and achieved very
stable and high revenue on all three pairs.
Key words: high frequency trading; statistical arbitrage; stationary process

0
O@| u 20 V 80 cd"|i, y3
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{. gLuy]dm''X, L]|E#d
S, dS3OkEA5, l 3]dp, 3

vF: 2013-06
1: , I, ), n7K. Email: chen371502@163.com.
&: 7, I, , B, n7K, . Email: sjwu@stat.ecnu.edu.cn.
15 , : I| ETF @| 145

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V 80 c. ;.X]i^{|.
3I , .,
O@|{9. Nath[1] ^
{dd
{
@. Burgess[2,3]
^XC.?1
O@|nSLy. Elliott [4] Binh Do [5]
, ]
d Vasicek L. IS', 3/
I k
?:U . u[6] Ly 50ETF , y 180ETF y 100ETF q
 300 ?1E, 'X, |^D|. [7] ^aq{
I
?7|3O@|.
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}<, O@|,Lwqx,  , Js. 3
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vk, ]dLEYu,
5`{=
. O@|#(J, J

#{\, up
?1, m~O, 3ELK.
I7K| ETF(Exchange Traded Fund).  ETF E
y7, 3?|I |, IT+15K,
. , u ETF a$x], d, b]3?1ETFp
@|ck
I ETF a, 3p@|mu)
lk. (JA ETF :.

1 @|.
u7K|7K] X Y , ^ Xt Yt Ld, t = 1, 2, 3, 4, .
XJ3 ax ay , 

ax Xt ay Yt = mt + st t , (1)

mt , st pL, {t } "L Var(t ) = 1,

K(1)=E#dL. 3(1),  mt st ~, za
C..

\ mt , .(1)., O, 3u.(1)X
ax ay k. 3SL, ]\]7L]
, , .vk, d, |^.'X
eky.
4.]|, I3
.Xc, 3SLzg
. dp@|~K: I]6
5vv@|g?1], l ]|k,
@|}. ,u'X]|3~.(1)X ax ay
U2, @3.(1)?
.C
 mt , {\
. st t . @|
7 L {t } m.
 146 u(g,) 2013 c

,X ax ay .]dL, 3S@

|L, k|uX C. d, XUC ax (t) ay (t). d
uuz ax (t) = ax ay (t) = ay , kA {mt (ax , ay )},
{st (ax , ay )} L {t (ax , ay )}. d, .?

ax (t)Xt ay (t)Yt = mt (ax (t), ay (t)) + st (ax (t), ay (t))t (ax (t), ay (t)). (2)

3e, k mt (ax (t), ay (t)), st (ax (t), ay (t)) t (ax (t), ay (t)) ,OP mt , st
t .

2 
ax (.)X ay (.)Y #]| B, =3 t k B u3 t
k ax (t)  X, k ay (t)  Y .
m:: e t1 > c t < c, K3t\| B m; e t1 6 c t > c, K
3 t | B m, c > 0 m.
:: e8c3, t1 6 d t > d, K3 t ; e8c3
, t1 > d t < d, K3 t , d > 0 .
), 3yK c = 2.5, d = 1.
du3p, m~, =B5u)
C, |^
{E,. d, ^.

3 9LO
3 ? 1 @ | c,  .(2) k I  O {ax (t)}, {ay (t)}, {mt (ax (t), ay (t))},
{st (ax (t), ay (t))} oL, , ?O {t (ax (t), ay (t))}.
u ax (t) ay (t), LXe5yK`):

ArgMin{ax (t)Xt + ay (t)Yt }

ax (t), ay (t) N+ (3)
s.t.

|ax (t) V (DXt )ay (t) V (DYt )|
< threshold,
max{ax (t) V (DXt ), ay (t) V (DXt )}

V (DXt ) = Var(Xt Xt1 ), V (DYt ) = Var(Yt Yt1 ). 3SA^, ^L

mS] X Y dO Var(Xt Xt1 ) Var(Yt Yt1 )O. 
^LdO,  threshold=30%.
^ ^y
ax (t) ay (t) Cz. 3@|
AX@|||C, l y
@|k'~5.
7?1kxN.
u ax (t) ax ay (t) ay mS, A mt O, ^k
{, ^O{wE, w{

At = Xt + (1 )At1 . (4)
 15 , : I| ETF @| 147

k, ^X ?ndS {longt }. 3K{S

:, ?^  {middlet }, l  {mt } O

d + middle
mt = long \ t, (5)
t

l k
sd
t t = ax Xt ay Yt mt . (6)

u {st } O, .61{[., X GARCH(Generalized

AutoRegressive Conditional Heteroskedasticity) .. du7K|E,5, GARCH .
I#O, Is$m, @|p=, d, ^
O, ' GARCH .kZ5{,  t l, OmS
IO {st } O, =
v
u t  t 2
u 1 X 1 X
st = t sd
i i d
s
j j . (7)
l1 l
i=tl+1 j=tl+1

?,  t O
ax Xt ay Yt mt
t = , t = l, l + 1, (8)
st

u?|X ax ay , k| {mt }, {st }, {t } A. Xu

)Cz, AT^(4)(8)#O, B {t } SO.

4 y
y^I7K| ETF . 65, Jn65
rI], O 300ETF, 50ETF 180ETF. ^F 2013 c
1  1 F 2013 c 6  6 Fm 30 s . 3O, ^Y
, Y 0.03%.
4.1 180ETF 50ETF @|
3(, k^;{?1@|, , |^J{?1@
|, '@|{(J`. '(JL, J@|{`u;
@|{.
4.1.1 ;{@|
^ Engel-Granger {Sk'X. L5u, 50ETF
180ETF dS I(1) S, mU3'X. b'X.Xe

P (t)50ETF = a + bP (t)180ETF + t . (9)

e 50ETF 180ETF dS3'X, K t A 0 %

3mS. ^ OLS {?1O, S, ?15u
, (JXL 1 .
 148 u(g,) 2013 c

L 1 Sf5u
Tab. 1 Weak stationary test for series
uS u{ u P
.S ADF test < 0.001
z t S ADF test < 0.001
zgS(Y ) ADF test < 0.001
zgmS ADF test < 0.001

 p , 3 5% &Ye@S3, S. d,

@ 50ETF 180ETF dSm3'X, SX 1 . |^.
5?1@|3.

1 180ETF 50ETF 
Fig. 1 Residual of cointegration model between 180ETF and 50ETF

@|~{,  t L,z|, O,z\

|, #> 0 :|. LH{{, IO 0.01 , 3
IO 1 IO3k|J|z. |(J, 
z 1.14 IO. 3 100 FS, o
>u
11 g
, cz 19.59%. Tcz3S`z(J. , 3
 S`(JLyAU, 3S
", y
w, U. XJE,Uc
O1, Uy, @|.kU", J
@|{u@|`.

4.1.2 #{@|

mSc 5 F, ^uO1 6 F1^Pd

S. J{, 
y 9 gXCz, L 2 P
zgCz
XN.

L 2 @| |  X
180ETF 50ETF@
Tab. 2 Matching coefficients of 180ETF & 50ETF arbitrage portfolio
m: 2401 2493 6152 6823 11453 12005 41265 42127 44282 44966
180ETF X 4 3 4 3 4 3 4 3 2 3
50ETF X 1 1 1 1 1 1 1 1 1 1

^ long = 1/240, short = 1/90 z mt , ^ l=180 z st , l z

15 , : I| ETF @| 149

{t } LO. 2 L|^zXdSS,

1 1!3!7!10 S, Sy
w.  {t } OSX
3 .

2 XCz:: ]dA dS

Fig. 2 Series of the difference of ETF price multiplied by relative matching coefficient
separated by changing point of branch multiplier

3 XCz: z t OS

Fig. 3 Time series for estimation of t separated by changing point of matching coefficient

L 1
zS5u(J, 3 5% &Ye, k 10 t S
, .(2)b, ^dS?1@|.
u, J|5'. 5Ik, X Sharp
[9]
' . ^yzgS{`5. Sk
u)mk ^S?1S, zg@|Y p
I,  4. , , L 1 
dS?15u(J, y
S5, l
 150 u(g,) 2013 c

`
#{@|5.
zgJ|?1\O, 
z@||\OX 5 ,
\O`
155. cz 95.68% L
@|{3S`|.

4 180ETF 50ETF @||zg 5 180ETF 50ETF@||\

S Fig. 5 Accumulated profit per unit arbitrage
Fig. 4 Profit of per unit arbitrage portfolio of portfolio of 180ETF & 50ETF
180ETF & 50ETF every trading time

md'<, m
x, d, m
p. 3kycJe, zg
m5`. 6
180ETF&50ETF @||zgmS
, , 3m , E,L5u(L 1)m
(. , 7 zgm, 3 100 F 317 g,
k 20 gmL 1 h, k3 2 h S.

6 180ETF 50ETF @|zgm 7 180ETF 50ETF @|m

Fig. 6 Minutes of continuously holding position Fig. 7 Distribution of continuously holding
of portfolio of 180ETF & 50ETF position of portfolio 180ETF & 50ETF

4.2 180ETF 300ETF , 50ETF 300ETF @||

u 180ETF 300ETF @||, 9 300ETF 50ETF @|
|, ^{?1LO, @|kLy, L 3 
9
 15 , : I| ETF @| 151

 3 |@|Ly.

L 3 @||Ly(J
Tab. 3 Performance of arbitrage portfolio
300ETF&50ETF 300ETF&180ETF 50ETF&180ETF
/% 75.52 95.68 95.90
cz/% 18.35 81.34 98.75
Sg/% 241 278 319
S/% 1.22 0.42 0.26
g' 5.49 23.54 22.53

5 o (
J
#, u.\dL., d.:
J#p{, A^I|n| ETF300ETF, 180ETF
50ETF |n]|, 
-<@|(J. , @|3
?<y
I3?|3:K, 38 
'JnS.

[  z]
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