Research On Multifactor Stock Selection Strategy Considering Corporate Social Responsibility

With the increasing attention paid to quantitative trading strategies in China,multi factor stock selection strategy,as the mainstream strategy of quantitative investment,has quickly become the most popular investment method in the quantitative market due to its objective and scientific stock selection ability and stable return level.This has also led to a large number of scholars and relevant financial institutions conducting in-depth exploration of stock selection factors,resulting in a continuous decline in the stock selection ability of traditional financial performance and market trend style factors.There is an urgent need to explore new non-financial factors to improve traditional multi factor models.At the same time,with the transformation of China’s economy from high-speed development to high-quality development and the implementation of the "dual carbon" goal,the domestic market environment is more favorable for enterprises that attach importance to social responsibility and environmental protection.Traditional financial factors can no longer fully reflect the investment value of domestic enterprises.Therefore,in the current domestic market environment,it is necessary to consider the impact of corporate social responsibility on investment returns.From the perspective of corporate social responsibility investment philosophy,thesis constructs a comprehensive evaluation system for corporate social responsibility based on the rating methods of domestic professional institutions,and introduces it into traditional multi factor models to try to improve the stock selection ability of this strategy.In order to achieve the research objectives,firstly,thesis demonstrates the theoretical feasibility of this study by organizing past academic literature.Secondly,thesis constructs a traditional multi factor stock selection strategy based on the CSI-300 market index and obtains excess returns,proving that the multi factor model is applicable to the domestic market.Furthermore,based on corporate social responsibility rating methods of previous scholars and related institutions,thesis constructs a comprehensive evaluation system using exploratory factor analysis and calculates the comprehensive score of corporate social responsibility.Finally,based on this score,the traditional multi factor model was improved and the performance of the optimized model was analyzed.The main conclusions of thesis are as follows:(1)The multi factor stock selection strategy is applicable to the domestic market,and traditional financial factors still have good stock selection ability in the current A-share market.(2)The improved multi factor model considering corporate social responsibility has not only improved its stock selection ability,but also improved its risk tolerance and stability.The improved multi factor model to enhance its ability to extract non-financial information by measuring corporate social responsibility,while retaining the original stock selection ability based on financial factors,making the strategy more rigorous and applicable to the Chinese market.(3)The comprehensive evaluation system of corporate social responsibility constructed by using exploratory factor analysis can fully measure the social responsibility of enterprises,and the final comprehensive score is applicable to the domestic market environment,which can help investors make investment decisions.