A Quantitative Model Of The Chinese Stock Market Sector Allocation

This work firstly studied the prerequisites needed for asset allocation by industry group, and the relationship between industrial cycle and stock index of an industry group. Guided by APT, this work also constructs a multi—factor model to forecast the return after added to an industry index.Further, this work creates an asset allocation by industry group model according to the theories of portoflio management, and put the short mechanism into the MVO model to improve portfolio performance.In the light of the hypothesis of Neutral Capital Market. CMA and EMH, the necessity and availability for industry asset allocation in Chinese stocks market has been studied. The result of an empirical study show that industry asset allocation is necessary and active industry asset allocation is effective.Then,after add to an industry index, the multi—factor model to forecast an industry's stock index is built according to APT.Finally,this work proposes that the industry asset allocation by MVO Can be enforced by the prediction of all industries'index return and the measurement of incurred risks; At the same time based on the introduction of margin trading business for the traditional study of Chinese stock market, the short mechanism is put into MVO model mechanism to improve it. Empirical results, industry asset allocation portfolio risk-adjusted return is better than market benchmarks; short introduction of the mechanism can effectively improve the efficiency of asset allocation.