Parasitic Stock-picking Strategy Based On Timing Advantages Of Public Mutual Funds

After more than 30 years of development,China’s securities market has become relatively mature,with the number of stocks in the A-share market increasing dramatically since the 2005 equity reform,and with the implementation of the full registration system in 2023,the number of stocks will further increase and the market will become even larger,while at the same time,the quality of the listed companies will become even more varied.As a result,the selection of quality underlying stocks will become more difficult,and investors are eager to solve the underlying screening problem and benefit from the market in the long run.At present,there are three main market analysis methods to solve the underlying screening problem,namely fundamental analysis,technical analysis,quantitative analysis.They are derived from a series of market hypotheses under different assumptions,such as the efficient market hypothesis,fractal market hypothesis,adaptive market hypothesis,and market hypothesis based on behavioral finance,to name a few.The efficient market hypothesis assumes that the market is efficient,that there are no methods that can beat the market,and that passive investment strategies are the optimal choice for investors;the rest of the hypotheses do not assume that the market is efficient,and believe that there are still methods that can beat the market,i.e.,the three types of analytical methods described in the previous section,as well as the parasitic analytical methods summarized in this paper.However,fundamental analysis,technical analysis and quantitative analysis methods,mostly through the law of exploring the underlying characteristics of the underlying direct screening,resulting in the assumption of the underlying characteristics of the conditions are too harsh,which in turn leads to the design of strategies based on the theoretical divergence of serious.In this paper,in order to explore stock picking strategies with lower theoretical divergence,after analyzing the existing strategies in the market that require less stringent assumptions on the underlying characteristics,we summarize the parasitic analysis method,and include arbitrage strategies,passive investment strategies,FOF fund strategies and so on under this analysis method.Parasitic analysis method is different from the above three analysis methods,it is no longer based on the selection of the underlying analysis of the underlying itself,but based on another subject(which can be a fund,index,stock,etc.)on the underlying response to make the corresponding changes,at this time the subject is called the host.After that,this paper relies on the parasitic analysis method,based on the elaboration and empirical evidence that the hypothesis of timing advantage is established,prudently selects public funds as the host,and puts forward a relatively novel parasitic stock selection strategy based on the timing advantage of public funds.The strategy indirectly screens the underlying through the host without making strict assumptions on the underlying characteristics,which reduces the theoretical divergence of the strategy to a certain extent.The effectiveness of the strategy is then empirically tested using three-year fund and stock data,and the results show that there is a significant correlation between the timing advantage and the return,and strategy users can optimize their own returns based on the returns of public funds by taking advantage of this correlation.The biggest contribution of this paper is a more reasonable argument for the logic of the effect of the timing advantage on the rate of return.One reason is that the timing advantage can optimize the efficiency of the use of funds based on the host investment strategy,and the other is based on the hypothesis that "changes in the investor’s holding time of the underlying(analogous to the timing advantage)affect the accuracy of the investor’s judgment of the underlying",which has been demonstrated later in the paper.Other contributions are the generalization of the concept of the parasitic analysis method,which is a useful addition to the analytical approach.The use of this analytical method can free the investment strategy design from the dependence on probing the market laws and provide more logical choices for the investment strategy design.In terms of writing,this paper firstly compares and analyzes the mainstream analytical methods,and summarizes the parasitic analytical method by analyzing many investment strategies in the market;secondly,it proposes the strategy designed according to this analytical method,that is,this paper is "based on the parasitic stock selection strategy of the timing advantage of the public equity fund",and makes a brief description;secondly,it separately analyzes the "timing advantage hypothesis",which is "a strategy based on the timing advantage of the public equity fund",and makes a brief description.The "timing advantage hypothesis" and the reasons for choosing public equity funds as the host are argued and explained;then the two previous arguments are integrated to explain the logic of the strategy in detail;finally,the effectiveness of the strategy is empirically tested by using the fund and stock data for the three-year period from 2018/04/09-2021/04/13,and the backtest results meet the expectations.test,and the backtest results are in line with expectations.