Applicability Of Active Investment Management Theory And Strategy

Whether individual investors or institutional investors and fund managers holding billions of dollars in funds, who engage in investment activities in the securities market will face the issues that how to better balance of securities assets held in the active investment management, and to make optimal management strategies. The theoretical basis of Active Management Strategy is that the securities market can not achieve absolutely efficient state, market is relatively inefficient, or may temporarily fail, there are securities mispriced by the market, active efforts of choosing time and securities will be able to outperform the market, access to over performance. The essence of the active strategy is that investment managers think the factors affecting the future earnings and risk of certain types of securities can be expected. For common shares, the active management includes the company’s future earnings, dividends or price earnings ratio forecasts; For fixed income securities, the expectation includes a forecast of future interest rate term structure; if the portfolio contains foreign securities,the future exchange rate forecast is required.In terms of the construction of active portfolio, by identifying mispriced securities, we make the securities weights of the constructed portfolio deviate from the securities weights of the benchmark portfolio in order to obtain an active return over the benchmark rate. The resulting active risk to be undertook is shown as the variance or standard deviation of the active rate of return, known as tracking error. The core of the active portfolio management is seeking to maximize the positive rate of return on condition that the tracking error is controlled in a range.This paper bases on modern investment theory and investment analysis, discussing the applicability of the Active Management Strategy in the Chinese stock market. Main contents are as follows:Chapter 1 is the literature review about the active investment management,mainly Including the theory and empirical evidence that Passive Management Strategy is superior to positive-type, the theory and empirical evidence that Active Management Strategy is superior to passive-type, the main content of active portfolio management as well as related domestic research.Chapter 2 is the theory and practice of the active investment management. First, starting from the behavior deviation of investors during the actual investment decision-making process, we indicate that stock market can not reach the perfect and effective state. Second, we verify the behavior features of Chinese stock market investors with the experimental methods,in order to provide theoretical and practical basis for successful use of the active management strategy in China’s stock market.Chapter 3 is the empirical research of the active management strategy based on the benefits incremental information. The results show that taking advantage of the benefits incremental information of listed company for active investment management can get excess return.Chapter 4 is the relationship research of the Chinese stock market based on the Mixture Distribution Hypothesis. Price-volume relationship is the most important relationship in the stock market, which is also the basis of technical analysis methods, playing an important role in the practice process of investing in the stock market. With ARCH type models, this paper does an in-depth analysis on the relationship between volume and price, especially on the relationship between trading volume of the different nature and the stock market price volatility after the decomposition of trading volume.Chapter 5 is the empirical research based on the moving average investment strategy. This paper selects the Shanghai Composite Index and the Dow Jones 30 industrial average index for the sample data, through the test of two moving average lines investment strategies and the revised test in which transaction costs are considered, finds that using the moving average line investment strategy in the Chinese stock market can achieve significant excess return.Chapter 6 is a research on the effect that stock index futures on the Shanghai and Shenzhen 300 stock index have on stock price index. The results show that, when ARIMAX model with stock index future sequence and ARIMA model without other input variables are in the same condition of parameters, the fitting error of the former decreases and the prediction accuracy improves significantly. This shows the stock index futures information can better predict the stock index.Chapter 7 is an empirical research on the active portfolio management based on the Treynor-Black model. By comparing the Sharpe measure of passive portfolio and active portfolio, verify the effectiveness of T-B model and prove the performance of optimized index portfolio can be better than the market index.Chapter 8 is an empirical research on the active portfolio management based on the Black-Litterman model. The results show that application of BL model in Chinese stock market for active portfolio management can achieve excess return, the BL model modified eliminates the drawbacks of the original model in order to gain more excess revenue.Chapter 9 proposes some ways to correct predictive value and improve prediction accuracy. The key to success of the Active Management Strategy is accurate prediction. This paper proposes methods on how to correct the forecast values according to the latest presented information data, respectively for ARMA models, Intervention Analysis Model and the Multivariate Regression Model that are commonly used for time series analysis.