Portfolio Insurance Strategie And Empirical Research

The Wall Street turmoil caused by the subprime mortgage crisis of the U.S in 2008 has made the global stock markets fall sharply. After that it evolved into a global financial crisis. The process developed so rapidly and widely that it is beyond the forecast of everybody. Many investors, even the governments made their wealth shrink in a large number. Therefore, how to seize control of the balance of investment income and risk has always been core contents of financial investment and the decision-making in investment. Portfolio insurance can ensure that the value of securities will be less than a defined level, not only it enable investors gain profits from the increasing stock prices, but also avoid losses caused by the stock market prices down.As the stock market of china is not isolated from the global economy, this paper takes the Shenzhen stock market as a reference to do empirical analysis. After making full research of different kinds of Portfolio Insurance, it analyzes the levels of performance with three most typical portfolio insurance strategies (OBPI, CPPI and CM) between the stock markets of Shanghai and Shenzhen by using performance indicators, such as Modified Shape ratio. The paper puts the market into there periods: bear market, bull market and vibration market. It analyzes the volatility and optimal situation of various periods by using the EVIEWS. It also makes empirical conclusions after making research of the factors, such as proportion of investment.The paper's innovations are the ones that take the Shenzhen stock market as a reference which can explain intuitively the applicability of PI in the Shanghai market, and use Modified Shape ratio to be a performance indicator which will overcome the problem of comparing in vain when the Shape ratio is negative. The empirical results show that the current financial market in China has basically met the conditions of PI strategies, and the implementation of three dynamic portfolio insurance strategies is feasible:Basically, the strategies show it is more effective to have higher proportion of investment insurance and lower Multiplier in the bear market; Although the overall level of volatility in the Shanghai market is not severe as in Shenzhen, performance levels and optimal strategy are not always the same between two markets in the periods of the bull market, bear market and consolidation market.