Effectiveness Of Tracking Error Minimizing Investment Strategy Under Multiple Benchmarks:Empirical Test

In 1952,Markowitz put forward the mean variance model,which provides a new way for investors[1].On the basis of this,scholars put forward a large number of investment strategies,and set up a modern investment theory system.With the maturity of Chinese financial market,Chinese scholars pay more and more attention to the research of investment strategy,hoping to find a more effective way to resource allocation,that can get higher yields,less risk.In this paper,we make investment strategy as the main line.First,the paper briefly describes the mean variance investment strategy,equal weight investment strategy,and the tracking error minimization strategy.Next,the paper makes an in-depth study on a strategy that can optimize the original investment strategy called multiple benchmark tracking error minimization strategy First of all,the strategy model and the solution of the model are discussed in detail,describing the advantage of the investment strategy is discussed by mathematical method.Secondly,this method is applied to the stock market,using simulation and empirical test,comparing with mean variance investment strategy,equal weight investment strategy,and the tracking error minimization strategy.Through empirical test this paper has the following conclusions:1.When the empirical research to the simulation data,minimizing tracking error rate variance based on multi benchmark portfolio has low volatility,high return,and high SHARP ratio.When using real data the minimizing tracking error rate variance based on multi benchmark portfolio still show a good investment effect,and with the increase of limitations on original investment strategy,the advantages of the tracking error of minimum variance benchmark portfolio investment strategy is much more obvious.2.Comparing with MBTEV and TEV strategy,MBTEV strategy has higher average rate of return,SHARP ratio and low volatility,showing better investment results.3.MBTEV strategy has the the lowest tuenover rate,strong practical operability.4.Using empirical data to draw the investor wealth line.The wealth line of MBTEV investment strategy is in a higher position,which can fully proved that MBTEV investment strategy can achieve higher income for investors,and effectively enhance the wealth of investors.To sum up,minimizing tracking error rate variance based on multi benchmark portfolio can achieve better investment performance,which is an effective investment strategy.At the same time,it provides some reference for Chinese investors and investment managers.