The Study Of Risk Parity Strategy Based On Stock Valuation

With the rapid development of Chinese economy,the number of high net worth population is increasing rapidly,and its investment demand is also extremely urgent.In July 7,2014,the Chinese Securities Regulatory Commission issued the "operation and management method of Public Raising Securities Investment Fund",which established the concept of FOF,and established the legal status of FOF.The traditional asset allocation is based on the mean variance combination model proposed by Markowitz in 1952,which maximizes the expected returns in the case of regular expected risk level,or minimizes the expected risk in the case of regular expected income level.However,in the process of optimization,the risk proportion of a certain asset in the portfolio often occupies a dominant position,which is inconsistent with the risk diversification of investment logic.Therefore,Dr.Edward Qian,the chief investment officer of PanAgora fund,first proposed the Risk Parity Model in 2005.The Risk Parity Model can distribute the risk equally among assets in order to maximize the risk dispersion.However,the risk factors used in current Risk Parity Models are based on price data,which may not be comprehensive for stock market risk.In this paper,the valuation is introduced into the risk assessment model,which makes the model more abundant in the dimension of risk characterization and better reflects the real risk situation in the stock market.When the stock market underestimates the value,it will increase the position and reduce the position when the stock market is overvalued,which is also consistent with the basic logic of investment.In this paper,the introduction of valuation breaks the disadvantage of traditional use of price data only,which makes the model make progress in earnings risk ratio.This paper selects CSI 500 Index,CSI 300 Index and CSI Aggregate Bond Index as the empirical data,and the empirical time interval is selected from January 1,2012 to December 31,2017.In comparison between the Risk Parity Model and the Valuation-Risk Parity Model,we tested CSI Aggregate Bond Index without using leverage,using lx leverage,and using 2x leverage.In the three comparison,the income risk ratio was raised from 1.8304 to 2.7125,1.2162 to 1.7793 and 0.9989 to 1.3672 respectively.At the same time,the Valuation Risk Parity Model maintains the largest retracement equivalent to the Risk Parity Model,and increases the risk while controlling the risk.