The Stock Selection Strategy Of Multifactor Model Based On Degree Of Complex Network

Chinese financial market is in a period of rapid development with openness and innovation.As a important part of quantitative investment,the quantitative stock-picking strategy has been increasingly valued by more and more investors.As stock returns and investment behaviors have been affected by various complicated factors,we have built complex network of Chinese stock market and combined it with the multifactor model,which is commonly used in quantitative investment,to find new impact factors.The study has important theoretical and practical significance for helping investor form the correct investment ideas,strategies and promote the healthy development of Chinese financial market.The core research idea of the paper is to research stock strategy based on multifactor model,include:build a complex network of stock market,and add degree factor,which is the key index of complex network,to the classical Fama-French model as the fourth impact factor of the new multifactor model.At last,this paper will validate the effectiveness of the strategies through historical data.Get the conclusion finally through researching and analyzing:Firstly,this paper tests whether there are scale effect,value effect and degree effect in Chinese stock market between 2009 and 2017,which turns out to be true that there are scale and value effects in Chinese stock market during the sample period.Moreover,degree effect also exists.Secondly,through regression analysis of each single factor and the improved multifactor model.The results show that every factor lacks adequate explanation to the whole sample.However,the multifactor model with the addition of the degree factor has a significant increase in explanation.Therefore,the model is considered to be effective.Finally,we developed a long position strategy,a short position strategy and a long-short strategy.By back-test,we find:Consideration of final net value,annualized yield,annualized volatility,maximum pullback rate,Sharpe ratio,the long-short strategy has the optimal performance.