| Summary: | 碩士 === 輔仁大學 === 金融與國際企業學系金融碩士班 === 99 === Title of thesis: Trading Performance of “Short Selling / Margin Buying Ratio” on Taiwan 50 ETF : An Application of the Threshold Cointergration Model
Name of Institute: Master’s Program in Finance, Department of Finance and Internation Business, Fu-Jen Catholic University
Name of Student: Lee, Tzu-Li
Advisor: Dr. Nen-Jing, Chen
Total Pages:70
Keywords: short Selling / margin Buying Ratio, credit transaction, two regimes threshold co-integration model, Taiwan stock index, Taiwan 50 ETF
Abstract:
In March 10, 1980, Fuhwa Securities Finance was founded and became the first financial firm in Taiwan to provide margin financing and securities lending services. Stock individual investors could start short selling and margin financing. Since then, security financing behavior became one of the most important fields of research in stock markets.
This thesis uses Hanson and Seo (2002) two regimes threshold co-integration model to research the relationship between Taiwan stock index and security financing, estimate the threshold of short selling/margin buying ratio, develop trading strategies based on the short selling/margin buying ratio, carry out trading simulation, and evaluate the trading performance. Finally, suggestions are given to investors on the using of trading index and strategy developed in this study.
As it is impossible to trade in Taiwan stock index itself, this thesis uses Taiwan 50 ETF to practice out-of-sample trading simulation. The period of research is 2004/01 to 2010/12. The primary results of this research are:
1. The relationship between Taiwan stock index and short selling/margin buying ratio is non-linear and has remarkable threshold effect.
2. Short selling/margin buying ratio is a good trading index, the trading strategies based on this ratio have good performance.
3. Using short selling/margin buying ratio as trading index performs well for holding period above two days.
4. The estimated threshold may not be able to adjust immediately to financial crisis, and therefore may lead to wrong investment decision. Hence, it is suggested that investors be aware of financial events momentarily.
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