Excellent Portfolio Screening, Under The H-value Significance

In this paper, we will study how to select several top quality security to combine and invest from the thousands of bonds that exist in the security market. The first step is to decide upon the H-value rule to appraise the portfolio( including the absoluteness of short-sale and the restriction of short-sale ) under which we can carry out the selection of top quality portfolio. Secondly, we introduce the market index model and describe the method that greatly simplifies the selection process once the t-value condition theorem is satisfied. In the case of equilibrium (equilibrium is a special case of t-value condition theorem ), the selection just depends on the H-value of a single bond. At the last, we can obtain the optimal stopping-time when to adjust the 0-time selected bonds under rational expectation equilibrium condition.