Portfolio Selection By DEA Cross Efficiency Evaluation Combing Value And Momentum Strategies

With the value premium phenomenon and momentum effect have been verified in the world's major capital markets, using value investment strategy and momentum investment strategy can bring significant excess returns for investors has become consistent view in financial investment field. On this basis, the construction of value and momentum mixed strategy which can bring higher excess returns has gradually become a new hot spot in the field of financial investment theoretical circles and practice circles. Some scholars give further researches on the core problem of how to effectively fusion value strategy and momentum strategy and achieved certain results, but they focus on how to obtain high expected returns by effectively amalgamate value and the momentum indicators, while lack enough attention on the risks which affect portfolio selection and investor risk preferences.This paper mainly discusses the value and momentum mixed strategy portfolio selection problem of Chinese A-share market under the condition of portfolio risks and investor risk preferences. This paper utilizes stock data of the Shanghai A-share market from 2005 to 2015 as the study sample. At first, this paper does profitability analysis of single value strategy and single momentum (winner) strategy, along with choosing the most effective value indicators and momentum indicators according to the results; Secondly, we construct value and momentum mixed strategy by using DEA cross efficiency method to integrate effective value indicators and momentum indicators, then constructing mean-variance (MV) and mean semi-variance (MSV) value and momentum mixed strategy DEA cross efficiency portfolio optimization model according to different stock investors'risk preferences and risk measurement methods, and then we evaluate the relative profitability and efficiency of the portfolios in order to find out efficient value and momentum mixed strategy DEA cross efficiency evaluation portfolio selection model for investors with different risk preferences. The empirical study based on the Shanghai A-share market shows that the expected return of DEA cross efficiency stock portfolio was significantly higher than that of the Shanghai A-share market stock portfolio, the expected return and risk-adjusted return (Sharpe ratio) of different holding periods mean-variance and longer holding periods mean semi-variance DEA cross efficiency stock portfolios are also higher than those of single value and single momentum (winner) stock portfolio; Mean-variance (MV) value and momentum mixed strategy DEA cross efficiency stock portfolio could obtain higher returns than that of mean semi-variance (MSV) value and momentum mixed strategy DEA cross efficiency stock portfolio in the long holding periods. Finally, combined with the empirical research results, we put forward the corresponding suggestions for the investment practice of different risk preference investors.This study effectively amalgamates value and momentum mixed strategy by using the DEA cross efficiency method, and constructs mean-variance (MV) and mean semi-variance (MSV) value and momentum mixed strategy DEA cross efficiency evaluation portfolio selection models which suit investors with different risk preferences, also provides effective theoretical guidance and reference for investors to make decisions.