[00:02] quantpedia explains trading strategy's video series today we will talk about the trading strategies for the Chinese stock market today I would like to discuss trading strategies and investing strategies in
[00:17] international markets so the US the United States talks makes around 50 of World Market Equity capitalization so there is another 50 percent of the market that's not in U.S what are those countries so usually it's European Union
[00:30] Japan and other developed markets and some of the big names from elementary markets like China or India we do not cover only U.S equities or U.S strategies so in wampedia the responsible to use the button region
[00:46] sort for different strategies from different regions I would like to discuss the Chinese market in this video we will speak in Bound to China the China is a really big Market at the moment investing in trading of stocks is
[01:00] of trading strategies a lot of investment strategies that are working in U.S that we can translate and use also in China One of the examples is intraday and over United FX it works very well in us and they works very well
[01:15] session usually had higher performance than introduction for a lot of the economies and all of the trading strategies and it works very well in strategies and it works very well in China as well as in us but we already
[01:29] covered the overnight trading and overnight trading strategies well in other previous videos so I would like to mention another thing that's very important when you want to invest or trade international talks or in this
[01:41] case China a very important thing is the impact of data set selection on the what does it mean there are a lot of companies that are listed in local Chinese market and also there are other companies listed in other European and
[01:55] Japanese markets that are traded also in the US there are traded in the form of ADR ADR is a special form of the stock so the stock is not traded only on a local market but it has also a special entity on the U.S market where you can
[02:09] directly buy the stock without any the Chinese market you can very easily check on the list of adrs for each country on a public cable the screeners like female.com or by the finance yahoo.com or other Spinners so here we have a here
[02:23] I picked the country China and as you can see we have over nearly 200 or 300 blocks that are from China and are available to buy on the U.S market some of the biggest names like Alibaba Baidu dance and etc etc we can buy those names
[02:40] in U.S market but what is very important is to understand that not all of the strategies that work very well in local Chinese markets so in China works well
[02:52] also in these idrs or in the stocks that are traded also in the US there are some strategies that works very well in local market but they do not work at all in a Chinese avrs or in change so those are the exchanges that are more easily
[03:07] available for international investors I will try to show you what doesn't mean or what I mean by that so we were able to obtain the data set from data is the to obtain the data set from data is the data set that covers the Chinese Asia so
[03:20] did the Chinese local in Mainland market and we try to run strategies developed by academics and compare the Performance Based on the local Chinese Asian market Mainland market and compare the performance of trading strategy that's
[03:34] traded using the adrs the stocks that can be accessed easily on the U.S market and build the stocks of Chinese companies so the first trading strategy is written by Leo kyushan and hang in 2032 and it's a long shot reversal
[03:49] portfolio but there is a condition on Arbitrage intensity that's calculate it via the variable called correversal that measures the degree of abnormal return correlation among the stocks the calculation is very easy and we can use
[04:02] only just pricing data to calculate these strategy so it's not too hard to calculate and we perform to backtest the full backfest was performed on Chinese adrs listed in U.S market like New York State change and you can see the
[04:16] nice so we have a negative performance very high draw down over 40 overall the strategy is not performing at all on Chinese adrs in the U.S on the other hand when we try to backtest the performance on the local Chinese azures
[04:32] or in local the performance is positive positive performance with the small roll down strategies work well in a local Chinese market why is that so and what is the reason the probability reason for that is because the Chinese market has
[04:44] some specifics as other energy Market countries or other International countries so not all of the strategies can be easily translated into the Chinese market or from Chinese marketing to a Chinese ADR in the U.S so it's very
[04:56] important to pay attention what is the data set used and where is the anomaly really present so there is another paper written by Yoon Huang Liu Sarah what they found out Is the participation of retro investors differs in China markets
[05:12] between the high price stocks and low price stocks so the Chinese market is very very popular in Chinese investors so if there is a different number of retail participants compared to institutions in the local Chinese market
[05:25] compared to other development like us U.S market is driven mainly by tuitions market is driven mainly by retro investors and because it's a driven by Rich investors there are some strategies that are working better in a local
[05:38] reason for the second trading strategy or that also the case for the second trading strategy shows that the lowest price has a very strong short-term reversal on the other hand the high priced stocks has very strong momentum
[05:52] and because the adrs in the US are usually the high priced stocks and usually the stocks from the bigger companies previous strategies are not performing very well in adrs they are better performing in a local Chinese
[06:05] market on the other hand we can check what is the performance of the momentum methodology or momentum trading strategies
[06:17] local Asia's Market or in the local market we can see that the momentums footage based on highest price stocks perform very well or perform as well so we have over eight percent performance in Chinese local market and what is the
[06:31] performance when we applied ADR in the United States so we can see that again the performance of the strategies significantly over with a high maximum roll down so even that we are using the higher priced stocks and
[06:45] large blocks peel the greatest performance well in China but not in in adrs role is our conclusion so it will be great if investment factors and training strategies worked all around the world without the change
[06:59] all around the world without the change and other all circumstances but it's not like that it's very important uh some of the strategies are very marketing as we showed in this third analysis and especially Chinese market has a its own
[07:11] specifics to higher representation of Greater investors and there is law of efficiency we cannot count strategies to work the same way as they work in the US so there is very very important to pay attention when we have some anomaly it
[07:23] local market because the local market has its own specifically thank you very much for attention and I hope that you will join me in another video interested then pick another video to learn more or subscribe to quad pedia Pro and try how
[07:38] significantly save time spent on quantitative research