The Application Research Of Hedge Fund Strategies In Chinese Market Environment

With the introduction of margin trading and stock index futures, the developmentof hedge fund becomes possible. Hedge funds will have a great development in thenext period of time.Hedge funds can take short positions in various financial instruments to hedgemarket risk. There is low correlation between return of hedge funds and return ofmarket. That really meets the requirements of investors who need a wide range ofassets allocation and risk diversification. Apart from that, hedge funds use leverage toenlarge its profit to a considerable number.Hedge funds have developed several decades and became mature in the world.But it just started in China several years ago. There is less research based on hedgefunds in the China environment.This paper represents the concept, history, current situation and investmentstrategies of hedge fund and introduces margin trading and stock index futureslaunched in China in2010. After that, this paper conducts empirical research on thebases of public data and proves that the strategies used by hedge funds can hedgemarket risk and effectively reducing the volatility of the portfolio. It contributes tolow correlation between the return of portfolio and market. Finally, this paper pointsout that the development of hedge fund faces some restrictions in China, and thengives some recommendations to improve these restrictions.