| With the rapid development of China’s economy,by the end of 2018,the number of Listed Companies in China’s A-share market has exceeded 3600,and the assets management scale of major financial institutions has reached 160 trillion RMB.,which has a considerable volume and is suitable for quantitative investment.Quantitative investment has also attracted more and more attention from the market.Since China Financial Futures Exchange launched its first stock index futures in 2010,the research on quantitative investment in China has developed rapidly.As the mainstream model of quantitative investment,multi-factor model has been used by many securities firms and funds.Compared with traditional investment,the advantage of multi-factor model is that it can control risk more accurately.It provides relatively stable excess returns,but also exposes some problems such as many factors are effective in foreign markets and will failurein China’s market,the imperfection of risk warning and hedging mechanism.The purpose of this paper is to explore a multi-factor model,which are suitable for China’s A-share market,and fand a suitable methods to hedging financial risk,further improve the advantages of multi-factor model in risk control,provide more stable returns for investors,and prevent the impact of financial risks on portfolio.This paper is divided into six chapters:The first chapter introduces the background and significance of the topic,research methods and ideas,and innovative points of the paper.The second chapter is literature review,explaining the research status of scholars at home and abroad.The third chapter introduces the theoretical basis and construction methods of multi-factor strategy.The fourth chapter is empirical test and retest analysis.The fifth chapter is the innovation of this article.The innovation is to enhance portfolio performance by establishing an Index-Enhanced multi-factor model.The last chapter is the conclusion and prospect of the study.The specific contents of the article are as follows:Firstly,this paper introduces the origin of multi-factor model and related theoretical basis,and then lists the construction methods of multi-factor model and the advantages and disadvantages of each method.Then the paper selected data of all A-share companies listed on the main board from January 2011 to December 2017,the data frequency is monthly,all the data make up as the sample interval.Seven types of style factors are selected and synthesized from 25 factors through single factor validity analysis.This paper select seven effective factors use follwing method,test the correlation between the next period’s return rate and the factor’s exposures in the current period and the factor’s return.rate.Then,we use Markowitz dynamic analysis nethod to confirm the factor weights,and measure it in the outer sample interval from January 2018 to April 2019.The results show that the portfolio achieves a total of 27.26%excess returns,the maximum return rate is only 19.05%,and the monthly success rate is as high as 65.3%.Finally,this paper uses the minimum variance method to hedge the risk of portfolio through stock index futures,and finds that the hedging effect of using the CSE 500 stock index futures is the best,which reduces the volatility by 45.34%,the maximum withdrawal by 59.78%,and the Sharp ratio increase 73.7%.It significantly reduces the risk of the portfolio and improves the performance of the portfolio.According to the above research results the article puts forward the following investment proposals:First,quantitative stock selection and quantitative hedging are combined to maintain relatively stable positive investment returns.Second,pay attention to individual stock information,and guard against asset losses caused by unexpected circumstances.Third,control the proportion of investment funds in personal assets and avoid leverage financing as far as possible.Fourth,strictly enforce the trading rules and treat the profits and losses in stock trading with a stable attitude. |
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