Study On Multi-Factor Model Based On Grey Correlation Analysis Method

As a wildly used quant strategy,multi-factor model tries to build a stably profitable portfolio by analyzing factors that can affect stocks' price.On the bases of previous researches,a new multi-factor model based on grey correlation analysis is proposed in the research.And the validity and stability of the new multi-factor model and parameters' attributes are discussed by theoretical analysis and empirical test.Taking grey correlation analysis method as the correlation-measuring tool,the model proposed in the paper measures the correlation between factors and stock returns and its stability to construct investment portfolios.The empirical study indicates that the multi-factor model proposed in the paper is effective and stable,it is applicable to A-share market,and A-shares market is inefficient.Besides,parameters' attributes are discussed by theoretical analysis and empirical test.The empirical study indicate that with the increase of the number of effective factor,hedged return increases initially and decreases afterwards,with the difference of weights increases,hedged return increases initially and decreases afterwards,the weighted scoring method is better than the arithmetic average scoring method,hedged return and its fluctuation are proportional to the number of stocks hedged portfolio contains.Finally,in order to make the model's return close to reality as much as possible,the paper tests the return hedged by future.Empirical study indicates that,because of the premium,future-hedged return differ the benchmark-hedged return and leads to unexpected loss.