Research On The Quantitative Investment Strategies: Based On Market Sentiment Timing

Quantitative investment developed rapidly and traditional investment methods do not have more advantages. With the rapid development of computer technology, quantitative investment has a pivotal role in the domestic investment industry. Compared with other countries, Chinese quantitative investment is still a long way to go, although our quantitative investment in recent years has made rapid development. Domestic research on quantitative investment is generally concentrated in the business community and theoretical studies is quite small, so its theoretical study has practical significance.In recent years, a number of phenomenon that traditional financial theory can not explain occur frequently, therefore behavioral finance continues to develop. Some points of behavioral finance has inspired new directions of our research process. For example, in recent years, many scholars have been concerned the study of investor sentiment, because investor behavior and psychology has an important impact on asset prices in financial markets. How to introduce investor sentiment variable in the quantitative investment framework is the focus of this study.Reference to the large number of documents, put the quantitative investment factor stock selection and investor sentiment combined organic in this article. Through the analysis and research of the large amounts of data on the Shanghai and Shenzhen stock markets, in turn raised the sentiment timing strategy and the quantitative investment strategies based on market sentiment timing. Presenting the sentiment timing strategy uses January 2006 to December 2013 a total of 8 years 96 month data. The six emotional variables using principal component analysis was converted into the first principal component. Monthly data using the first principal component transformation is called sentiment indicators, and monthly changes in the use of the first principal component transformation is called sentiment changes indicators. Comparing these two indicators yields in different areas of the month results long-term and short-term sentiment timing strategy. Presenting the quantitative investment strategy uses the method of factor stock selection. We select the effective factor and test the factor correlation. Use screened nine factors on stock options to sort, built four combination, result through comparative analysis on four combination.Empirical results show that the use of investor sentiment timing strategy in the quantitative investment strategy reduced the risk, so as to achieve the purpose of raising revenue. This shows that investor sentiment can indeed affect asset prices in the stock market, and using this effect relationship, we can construct a quantify portfolio to derive above-average market profits.