Design Of Stock Picking Scheme Based On Improved Multi-factor Asset Pricing Model

This paper conducts quantitative stock selection based on a variety of multi-factor capital asset pricing models.The purpose of its research is to first select the stocks of the Shanghai 180 Index constituent stocks to conduct scientific research and analysis of scientific pricing theory,which will help explain the impact of the Shanghai Stock Exchange.The important risk factors of stock returns in the A-share market provide theoretical assistance for investors’ rational investment.Secondly,by studying the three-factor,four-factor,and five-factor models,and the six-factor model after adding new factors,the Alpha stock picking strategy is used to compare the optimal models that can be applied to China’s 180 stock market.Certain theoretical value.Finally,through the experiment and backtesting of the model,the excess yield exceeding the market average is obtained through the optimal stock selection,and the theoretical and practical quantitative stock selection operations are closely combined.With regard to this article,the author independently completed the relevant empirical research and the establishment of the stock selection model and the verification study.Based on the review of the relevant capital asset pricing model theory,the author put forward the Fama-French five-factor model adding the liquidity factor to the original.The six-factor model was constructed and compared with the other three factors,four factors and five factors.The main empirical test methods used factorcorrelation analysis,redundancy factor test,and GRS model significance test.Based on the test results,the four most representative models are finally determined.Among them,because the scale factor and the book-to-market value ratio factor have a wide range of correlations and are not redundant,they are retained in all four multi-factor models,and the four-factor model with investment factors is less profitable than profitable.The four-factor model of factors has been removed.Similarly,the traditional Fama-French five-factor model is also retained because of the significance of the high two.The six-factor model is also the same.Therefore,after going through the test set optimization and test set backtesting,the paper finally concludes that the four-factor model and the six-factor model can compare the three-factor and five-factor models to the stock market’s profitability more scientifically.Pricing,so that you can get more than two other models of stock selection effect.