Industry Rotation Strategy Based On Stock Price Lead-lag Relationship

In recent years,quantitative investment has become a hot spot and focus of the development of the European and American capital markets.Many professionals have begun to participate in the development activities of quantitative investment strategies.The industry rotation strategy is one of the most sought after..The industry rotation strategy is an active trading strategy that utilizes the dislocation of different investment varieties to change the profitability of the industry varieties.The essence is the application of stock price lag in stock market arbitrage.This paper first uses the VAR model to empirically analyze the existence of the industry stock price lag phenomenon,and briefly analyzes the distribution of leading and lagging industries.Then it classifies the market performance of stock lead-lag phenomenon,and from the economic cycle,industrial correlation and information spillover explains the reasons for the stock lead-lag phenomenon.Finally,the paper uses Apriori algorithm to classify the relationship between the industry index and the association rules and rotation rules of the industry index yield data.Based on this,a strategy was established to perform backtesting.In order to improve the robustness of the results,this paper classifies the policy rules according to the lagging industry,and analyzes the effectiveness of the rules from the three perspectives of profit rate,frequency and winning rate.The results show that the non-financial industry's rotation strategy signals are consistent,and the more signals sent by the rotation rules,the more the non-financial industry's rotation strategy win rate and average rate of return.Based on this,we removed the unsound financial industry rotation rules,established a joint rule strategy for the other three non-financial industries and conducted backtesting again.The backtest results show that the three strategies have greatly improved compared with the previous ones.In the whole cycle of the backtesting,the strategy achieved over 20% excess return,and the maximum retreat was 7.5%,6.3% and 9.5% respectively.The joint rule strategy achieves stable returns under different market conditions,and the strategy has a small retreat.It can be used as an absolute return strategy for stable capital preservation to conduct investment practice.Through research,relevant suggestions were made to market managers and investors in the China stock market.For market managers,it is necessary to correctly understand the impact of industrial linkages on the stock market and regulate the order of information dissemination in the capital market.For investors,it is necessary to correctly understand the law of industry rotation and actively use the rotation strategy for asset allocation and risk.management.