Factor To Choose A Model Of Empirical Research On The Chinese Market

Base on the background of booming of quantitative method in Chinese stock market, this paper tries to seek for Alpha return using the multi-factor model.The first chapter introduces some basic knowledge of quantitative method, including the definition of quantitative method and the difference between quantitative investing and traditional investing. Then we introduce the advantages of quantitative investing and explain why to choose quantitative method. At last, this chapter talks about the background and the sense of our research.The second chapter introduces the history of the theories of quantitative methods, including Mean-variance model, Capital asset pricing model, Arbitrage pricing theory, efficient market hypothesis, behavioral finance and the application of non-linear science in finance. And then we talk about the securities investment fund using quantitative method both in Chinese and abroad.Our research begins from the third chapter. We do abundant empirical tests of25factors that may indicate the return of the stock using the data of Chinese A-stock market from Jan.2000to Feb.2012. We try to find sustainable factors with good discrimination by historical data. These factors we choose can be divided into growth factors, value factors, quality factors and momentum factors. And finally we find seven of the factors which perform well during the empirical time.The fourth chapter constructs five portfolios based on the empirical tests of factors in chapter3, namely growth portfolio, value portfolio, growth-value portfolio, growth-value-quality portfolio and best-factor portfolio. We test the performance of these five portfolios using A-stock market data in China and finally find that the best-factor strategy is the best strategy among all the strategies.The fifth chapter makes a summary about the whole paper.