The Study Of Quantitative Investment After Introduing The Short Sell Mechenism

In the framework of Grinold, Clarke, de Silva and Thorley s fundamental law of active investment, this paper studies the impact of the short sell constraint. The result shows this constraint will have significant impact on the performance of the active investment when the constituents of the index concentrate on a few stocks. The main reason is that the short sell constraint limits portfolio manager to fully use the bad news. The result from the mock data shows the information ratio of active investment obeys the fundamental law of active investment when there is no short sell constraint which can reduce nearly 40% of the usage of information. On the other hand the negative correlation of the Residual return can have a positive impact on the active investment frontier.This paper summarizes the status of the short sell mechanism in China, including the index futures and the margin trading. The margin trading can be used to construct the one stage long short portfolio while the index future can be used to construct the two stage long short portfolio. The empirical study shows that the spot price and the future price are co-integrated which is the basic condition that portfolio manager can use index future to implement their short strategy. On the other hand, the category of margin trading stocks is very limited and the fee is very high.This paper used the data from January 2005 to June 2010 of the CSI 800 index to empirically study the useful indicator for hunting Alpha. The results show: there is significant reverse effect in the stock market no matter in term of one month or three months; the size have impact on the return of stocks, the smaller the company the better the performance; PB is a good value indicator to choose portfolio while PE is not; due to the time delay of publication, the operational indicator have not shown any reasonable effect on choosing portfolio; Price is another useful indicator.In the last, this paper construct the long short portfolio based on the indicator found in previous chapters. The return and risk characteristic of these portfolio is very prominent which means this kind of portfolio will be a good choice of the public fund.