An Empirical Research On Portfolio Method Based On Energy Entropy Framework In Chinese Stock Market

The purpose of this research is to study how to construct a portfolio effectively in the long-term dynamic investment situation so that it can obtain excess returns compared to the benchmark portfolio.With the development of modern portfolio theory,using absolute return as an indicator to evaluate the performance of portfolio performance is not the only standard.The investment market is full of uncertainty.Profit is good,but loss is almost inevitable for any investor.At this time,it is more reasonable to use the relative value to evaluate the performance of a portfolio.The relative value approach means that investors pre-select a portfolio as a benchmark,and relative performance is obtained by comparing the portfolio performance selected by the investor with the performance of the benchmark portfolio.The evaluation standard of relative value has been widely accepted and applied,and excess returns have become an important indicator to evaluate the performance of fund managers.Research about how to construct a rebalancing portfolio strategy to obtain excess returns can provide investors and investment managers with scientific theory support and advice on investment methods,and can promote the development of financial markets.Therefore,this research has important practical value and significance.In the first chapter of this paper we introduce the background and significance of the research,and summarizes the literature of portfolio theory.In the second chapter,the energy entropy decomposition framework is introduced.The function and significance of each decomposition term are analyzed and illustrated,then compared with the volatility pumping and stochastic portfolio theory.The third chapter first introduces how to use energy entropy decomposition framework to get the construction of portfolio strategy,and introduces one of them called the λ strategy.Then empirical studies on the application of stocks and indices in Chinese stock market demonstrate that the portfolio constructed based on this method can perform better than the market portfolio in the long-term run,and also shows that the energy entropy decomposition method is indeed capture excess returns.For investors,it is very useful,especially for index investors.The innovations of this paper are presented below.We obtain the condition of the existence of solution to updating equation which use to rebalance in λ strategy.When there is no solution to updating equation,I proposed a revised λ strategy to get the rebalancing position reasonably.I find out a problem will appear in the calculation When I use λ strategy.Through the analysis I put forward the solution,and finally programming to achieve the rebalancing position of the λ strategy portfolio.Based on the empirical results,the value of each item of energy entropy decomposition is discussed in detail.It is found that more market information can be obtained based on the decomposition,and the application of the decomposition framework is broadened.Through analysis,the problem of the initial weight selection of the λ strategy is discussed in detail.The meaning of various types of initial weights is obtained through analysis,and the initial weights that cannot be used in the energy entropy method are.described.Then we make some reference comments for the investors to choose the initial weights.From this I do some improve work for λ strategy.Subsequently,the decline and rise of the relative entropy term in the bull market and the bear market are analyzed and explained.Then dynamical λ strategy is proposed.