Empirical Investigation Of APT And Research Of Application In Portfolio Investment Decision

With the appearance and rapid development of securities business, its status in our economic life and national development is more and more prominent, and it has been one of the cores in the capital investment market. Generally speaking, investors lean to obtain bigger decision-making utility with least risk and loss. And APT model fixes a price on capital on the basis of relatively small number of assumptions.The paper bases modern western portfolio theory. Firstly, we testify whether the price of ShenZhen stock conforms to APT model. We choose some stocks randomly to have an empirical investigation and estimate the factors using a statistical technique called factor analysis. The result shows that ShenZhen stock market conforms to multi-factor APT model. We not only estimate the number of factors, but also prove the presumption of their existence. Secondly, we establish an easy arbitrage portfolio, not taking the portfolio's expected return into account. And conventional computation of expected return is short of accuracy, so we introduce index smoothness model to estimate single stock's expected return to remedy the limitation. The result about the analysis of the portfolio shows that as long as arbitrage chance exists, each investor can get higher income, not increasing risk, no matter he is a risk averter or seeker. Finally, we introduce a portfolio model of APT model. We respectively have demonstration analysis on circumference of permitting short sales and not. In addition, detailed thoughts and computing process of the model are presented. The analysis shows that multi-factor APT model can provide higher income and give investors reliable suggestion.