Research On Quantitative Strategy Of Industry Sector Rotation Based On Regression Model

Since the end of the 20 th century,the phenomenon of sector rotation in the stock market has attracted great attention from investors.The traditional market view holds that at different stages of the business cycle,the plate rotation strategy can achieve better returns than the market strategy.This paper mainly applies the regression model to study the real value of the plate rotation investment strategy.This paper uses the 28 industry index synthetic index after six big plates,based on vector autoregressive prediction model is the empirical plate wheel move behind the existence of the law,its core idea is to use the current yield as explaining factor all plates,plates next to each industry yields do return to review whether there is a significant cross between plate yield prediction,for later build wheel dynamic strategy to lay the theoretical foundation.Then,this paper improves the model and proposes the idea of building a plate rotation strategy based on the principal component regression model.At each time section,the predicted return rate of each industry in the next period can be generated and the final configuration can be guided.Finally,a five-factor model is constructed to make performance attribution for the rate of return of the sector rotation strategy,and to test its risk exposure on various factors,so as to explain the source of strategic return.By observing the rule of plate rotation and drawing the plate rotation diagram,it is found that there is indeed some linkage between the plates.In the empirical and backtest of the plate rotation strategy based on the principal component regression model,the results show that when the length of the training window is 478 weeks and all the principal components participate in the regression,the long-short hedging portfolio and long-long portfolio of the industry plate rotation strategy can obtain significant returns.By testing the sensitivity of the strategy to the two parameters,the possible economic benefit changes of the strategy are demonstrated,the source of uncertainty is found,and the investment effect of the strategy is improved and improved.The performance attribution model shows that the PCA model achieves significant alpha returns,indicating that the income source of this strategy is mainly alpha,rather than income compensation through continuous exposure to specific risk factors.