A Study Of Risk Character And Investment Strategy Choice In Shanghai Stock Market

It is a lasting topic that how to invest in stock market effectively. Generally, the optimum investment strategy is to make a portfolio which maximize the return and minimize the risk. In any case, the forming of a portfolio can not ignore the risk character of the security market. It's important to investor to recognize the risk character of the security market.This paper study the risk character and relative investment strategy in shanghai stock exchange. Through analyze the relationship of risk character and results of different investment strategy, we make the "risk character and investment strategy choice" model to suggest investors.We find the choice of investment strategy relate to the risk character, the effect of value analysis investment strategy negative relate to the proportion of system risk. China stock market is not mature now while the proportion of system risk is still high, but we can see the proportion descend year by year.For all that, the value analysis investment strategy can get good result, value portfolio can acquire higher return with lower risk compare to magic portfolio.BM effect exists in China stock market. But the present degree of BM effect has something to do with the investment holding period, holding longer, the effect of BM is more obvious. This is because the market is valid incompletely, the market exists excessive reaction to the company's performance. However, it's wrong to consider higher BM leads to higher return. Actually, stock (portfolio) with BM value locates between highest and average can get best return, and long-term holding better than short-term holding.So we suggest investors should incline toward the adoption of value analysis investment strategy, and holding period should more than half a year. The value analysis investment strategy which basing on BM value should pays more attention tothe stock with BM value between highest and average and BM value between average and lowest.