Research On Multiple-factor Quantitative Stock Selection In A-share Market

The concept of quantitative stock selection rises up early in abroad, but it starts later in the Chinese market and also develops slowly. In china, quantitative stock selection are mostly studied in securities firm’s interal. The study and application about it are very few. In July 2014, as China’s a-share market bull market launching, investors’ enthusiasm rose. But with the stock market quotations downturn in June 2015, people gradually restored calm. Quantitativestock selection once again returned to investors’ sight. Multiple-factor stock selection is one of the most stable, effective and commonly used model in quantitative stock selection. No matter at home or in the international investment community, multi-factor model is the most studied and used by scholars.Firstly, this paper introduces the basic connotation, characteristics, the basic program and basic strategy of Multiple-factor stock selection. It enables the readers can have a clear understanding on multiple-factor stock selection. Secondly, this article divides the factorsinto four major aspects which will influence the public company’s stock and picks out 17 easy checking candidate factors, then hands effective the date from month transaction data and quarter financial statements in the a-share market between January 2005 to December 2015. Combined with the effective factors of test steps, this paper selects four effective factors. Thirdly, through the correlation test and set up effective threshold, we test redundancy of the effective factors. We find that the four effective factors screening in the paper are not redundant, then we get four effective without redundancy factors. They are p/b ratio, p/e ratio and net profit growth rate.Finally, we set up Z score model based on the weighted scoring, which used to empirical analysis of portfolio. Then we concludethat the stock portfolio in China as 55 for a set is optimal. Applying the date in a-stock market between January 2012 to December 2015 as out of sample test period, we test the factors we selected.And through the of index of the accumulative return rate, the excess annualized compound yields composite yield, sharpe ratio and the probability of getting positive income, we evaluate the model.The use of multiple-factor modelimpairs the weakness status of the individual investors in the capital market and avoids the emergence of some investmentemotion. This has a positive effect on the development of quantitative investment in China. But this article also has many deficiencies. Such as, theconsideringof factorsis not enough, the factors of macroeconomic and futures and options marketare not taken into consideration, and the four aspect factors in articleare just selected the part toanalyze. In the following studying, we still need to improve these deficiencies. We hope that multiple-factor stock selection can real apply to daily investment.