Font Size: a A A

A Research On Relationships Between Financial Indicators And Stock Returns In Different Economic Stages

Posted on:2018-01-13Degree:MasterType:Thesis
Country:ChinaCandidate:S W QuFull Text:PDF
GTID:2359330536983911Subject:Applied Economics, Quantitative Economics
Abstract/Summary:PDF Full Text Request
With the development of economy,the heat of investment in the financial market is rising gradually,and the quantitative investment is prevalent synchronously in the global.Specifically,Multi-Factor Stock Selection Model,as one of the quantitative models,has been widely used in academia for its practicality.The model aims to find a stock portfolio by analyzing the financial and other technical indicators which may influence the stock price,so that the total return of the stock portfolio can outperform the market index during a certain period in the future.In the Multi-Factor Stock Selection model,financial indicators are critical,which can reflect company's liability,profitability,operations and development.Thus,the variation of the financial indicators can affect investment decision to a great extent.Subsequently,it affects the stock price and investors' income.It's a hot topic in both academia and investment community how to guide the decision-making and lock the alpha income above the market according to the financial indicators.Based on this,the paper aims to research the relationships between China's financial indicators and stock returns under different economic stages.Specifically,two macroeconomic indexes,GDP and CPI,are introduced to divide Chinese economic stages by the approach of X-12-ARIMA and HP Filter model,based on the Merrill Lynch Investment Clock Theory.Referring to the multi-factor model,the Genetic Algorithm-Rough Set is applied to reduce the redundant financial indicators without decreasing the explanation of stock returns.In order to summarize the rotation laws in the different economic stages,the statistical analysis and comprehensive evaluation is conducted for the reduced financial indicators,combining the results of economy division.Besides,the spearman correlation analysis is applied to further explore the correlation between selected financial indicators and the stock returns.Taking the results of spearman correlation analysis and GA-RS as the weight of financial indicators,the Multi-Factor Stock–Picking strategy is constructed to test the validity of relationships between financial indicators and stock returns in four economic stategs.The final results show that the strategy outperforms the market returns about 49.47% in total and 2.061% higher per month.The winning percentage reached 66.67% during the sample period.There is a certain correlation between the financial indicators and stock returns.The stocks selected by financial indicators are significantly more defensive than others,which can guide the investor's investment decision-making and avoid the risk in a certain extent.
Keywords/Search Tags:Merrill Lynch Investment Clock, the Genetic Algorithm-Rough Set(GA-RS), the Multi-Factor Stock Selection Model, Economic Cycle, Financial Indicators
PDF Full Text Request
Related items