Chinese A-Stock Investment Strategy Based On The Multi-Factor Stock Selection Model

With the developing of computer technology, quantitative investment as a form of investment technology, which comes from American capital market, has received extensive attention from both academia and practice. At present, The quantitative investment has been widely applied by the actual market, the complex processing way also has a series of data and theories support, so it is attracting the attention of academia more and more.In this paper, the author made a brief introduction and explanation about the current method of quantitative investment on the foreign and domestic markets, also achieve a multi-factor stock selection models base on the Chinese A-share market with the Matlab software programming. I select executive compensation, equity structure, capital structure, profitability power, growth ability and technical indicators aspects 24 alternative factors. Then I choose seven effective factors through the test of factors’ validation and inter-factors’correlation Lastly, I build the percentage model and number model based on the seven effective factors.We find that the percentage model is meaningless in the A-share market, because of the stock return difference between the different portfolios is not very obviousWhile the number model which constructed in the paper has a good application, in the five years testing period, the high-yield portfolio has a distinct advantage in the aspects of excess rate of return, risk-reward ratio and picking winning percentage compared to the market benchmarks. The actual test also shows that when a portfolio contains 60 to 80 stocks, the portfolio is optimal which has higher earnings stability, lower risk and higher winning probability.Due to the limitations of data availability and the programs writing ability, the author only tested the Chinese A-Stock market 24 factors between 14 years period. So the future direction of the paper is to examine longer term, more time-frequency data, more factors and broader stock market. Only through those ways, the multi-factor stock selection model can apply in the actual market more suitably.