The Study Of New Investment Strategy Based On Margin Trading

This paper studies the securities investment strategy based on margin trading. In aseries of assumptions, it constructs the Markov chain model to predict the stock priceand a new risk measurement tool which is called CRNC. It means that the investors whoachieved the expected return on the condition that no margin call are faced by investors.The paper uses the conditional probability to control the risk. It is used in the Chinesestock market only cash as collateral to test the performance. The result shows that thisstrategy can get high return and reflects the superiority of the new strategy.It selects180stocks listed on the Shanghai Stock Exchange which155stocksmeets the requirement to study. The result shows that the return of the new investmentstrategy is higher relatively. The actual monthly returns of investors is positively withthe expected rate of return and negatively with the risk measurement value CRNC. Themaximum return corresponded to the initial margin ratio is remained at60%-70%. Theinvestor selects the expected rate of return and the level of risk control flexibility. Sothis new strategy is dynamic and flexibility.