Trend or Contrarian Trading ? Empirical Study of the Volatility Threshold Indicator in Taiwan Stock Index Futures and Taiwan Stock Index Options

• Main Authors: Ji-Shun Tang, 唐繼舜
• Other Authors: 許江河
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/un2s5c

碩士 === 國立虎尾科技大學 === 經營管理研究所 === 100 === By using the implied volatilities of TAIEX options and their underlying index, this study tries to build an indicator, namely the volatility threshold indicator. The purpose of this study is divided into two parts: In the first part, this study tries to investigate the effectiveness of volatility threshold indicator. This indicator is used for predicting the future volatitlity of TAIEX Index and serves as the decision-making basis for establishing the Short Strangle position. The data used are the daily data and span from January 2002 to October 2010. Our results show that the probability of correct signal generated by the volatility threshold indicator is 72.86%, and the chi-square homogeneity test reveals significant difference between the numbers of the correct and the wrong signal. In order to investigate whether the volatility threshold indicator could be used as the decision-making basis for Short Strangle strategy, we establish a Short Strangle position each month and hold the position till maturity. Our results show that there is 3,635 points profit when the position is built as the volatility threshold indicator is less than the critical value. On the contrary, there is 2,578 points loss when the position is built as the volatility threshold indicator is greater than the critical value. The t-test shows that the average profits of both cases are statistically different. Our findings suggest that the volatility threshold indicator could serve as the decision-making basis for Short Strangle strategy. In the second part, the volatility threshold coupled with moving average indicators and RSI indicators (namely, the volatility threshold comprehensive indicators) are used as the basis of buying and selling signals for TAIEX trading. The data period is from January 2002 to October 2010. The data include the daily trading data of TAIEX options and TAIEX futures index. In this study, four trading methods, namely, the trading method of volatility threshold comprehensive indicators, the moving average indicators trading method, RSI indicators trading method and the trading method of random number indicators are used to calculate return-risk ratio to compare with the return-risk ratio of the buy and hold strategy. The analysis results suggest that the returns of the trading method of volatility threshold comprehensive indicators are the best among all trading methods, and are better than the market returns. Finally, Friedman test finds that the return-risk ratio of the trading method of volatility threshold comprehensive indicators has significant differences from the return-risk ratio of other trading methods.