Prediction Research And Investment Analysis Of China’s Stock Market Return

Stock return prediction and stock investment strategy analysis are two core issues in modern finance research.In the past few decades,a large literature has studied the stock market theory of developed countries,while there are relatively few studies on China’s stock market.Since the start of its reform and opening up in 1978,China’s stock market has become perfect,the market value has increased rapidly,and more and more investors participate in the stock market.So,it is essential to study the relevant theories of China’s stock market.This paper studies the prediction of excess return in China’s stock market and the investment analysis of different strategies for the predicted data.This paper selects three factors suitable for China’s stock market-MKT,SMB and VMG as economic variables to predict the excess return of China’s stock market.This paper selects 25 portfolios in China’s stock market and uses VAR model to predict stock return.The results show that MKT,SMB and VMG economic variables have significant predictability both inside and outside the sample.After that,this paper analyzes the investment strategy of the predicted rate of return in-sample and out-sample,calculates the sharp ratio of different investment strategies,and compares the advantages of different strategies.The results show that the best investment strategy is the mean variance investment strategy,which is most suitable for the investment in China’s stock market.In addition,investors choose a longer rolling window period when investing,which will have better investment performance.This paper finds that when the rolling window period is 120 months,the sharp ratio is higher than that when the rolling window period is 60 months,which means that investors will get better investment results if they choose the rolling window period of 120 months.The innovations of this dissertation are: first,three factors suitable for China’s stock market are selected as economic prediction variables.The market value factor and value factor are improved according to the specific situation of China’s stock market,which is suitable for China’s stock market.In this paper,we use the VAR model rather than the least square method to predict the stock rate of return,and the prediction results are suitable for China’s national conditions.Second,different from studying the prediction of stock return alone or only the investment strategy,this paper studies not only the prediction of stock market excess return,but also the investment strategy of predicting stock return.The research of this paper is more complete,the research results are instructive to investors and have greater practical significance.