Design And Analysis Of Quantitative Hedging Strategies Based On Momentum Effects

The research object of this paper is HuShen300 Index,its constituentsand the HuShen300 Stock Index Futures.We build a quantitative portfolio with the momentum effect in order to get more profits than HuShen300 index,at the same time,portfolio can take the extra alpha returns.It is selling the HuShen300 stock index futures that can hedge the system risk and gain excess return.Most of academic study of hedge strategy focused on the optimal hedge ratio(h)calculation method.Although optimal hedge ratio can hedge market risk accurately,but it do not involve hedge opportunity and adjust the hedge ratio.So this paper,combines Stock Index Futures and Channel Breakthrough,dynamically adjust the hedge ratio.Reduce the hedge ratio properly when the stock value rises,inversely,strategy increase the hedge ratio when portfolio value has fallen dramatically.On the one hand,the strategy can give full play to the role of hedge market risk during the benchmark.On the other hand,strategy can get excess returns and market gains from Stock index during benchmark upward.So invests can enjoy alpha and the profits of the market at the same.Considering the trade authenticity,at the same time,HuShen300 Index do not fully simulate the HuShen300 Index Future contracts,so the article use HuShen300 Index Future contracts.As the result shows,this strategy did very well in the bull market,because the strategy get extra yield alpha and obtained the benefit from market upward at the same time.The result shows:yield of common hedge strategy is below adjust the hedge ratio but higher than static hedge portfolio.In bull market the two important parameters of momentum is formation period 40days,holding period 20 days,buy 30 stocks,calculate portfolio value maximum.minimum before 15days on the way of moving smooth,and to determine whether to adjust the hedge ratio.This strategy in a 'bear market performance is still good,just adjustment hedge ratio advantage than bull market is obvious.In bear market momentum strategies formation period 10days,holding period 10days,and buy 30 stocks,calculate portfolio value maximum.minimum before 5days on the way of moving smooth.Momentum strategy in this paper has a better performance in a bull market than in bear market.Hedge strategy merge adjustment hedge ratio is more obvious,can obtain additional upside benefits,at the same time can effectively avoid the risk of market downward asset value.