Research On Multi-factor Stock Selection Strategy Based On Large And Small Wheel Rotation

In the second half of 2014,blue chip rose and in the ascendancy,especially financial stocks.In the first half of 2015,hot plate took turns.Small-cap stocks such as internet finance,bio-medicine and high-tech led the market.The growth of the Growth Enterprise Market stocks continued to rise.The blue-chip also joined the bull market in response to policy stimulus.In July 2015,the whole stock market started a plunging journey after experienced excessive madness.In the first half of 2016,the small and medium-sized boards performance better,and the main board went weak.In the second half of the year,the market reversed.The blue chips punch up,and the GEM was grim.In 2017,the market strongly favored blue chip stocks.Investors gradually turned their attention from small cap stocks,such as theme stocks,to blue chip stocks which are suitable for value investment.This was inseparable from the impact of the stock market crash in 2015.Value investment once became popular.In 2017,most of the quantitative stock selection strategies underperformed the benchmark index and were questioned by investors.Further analysis found that many quantitative indicators that were previously strong performed were no longer effective.Instead,value indicators which were not favored strong performed.For example,small-scale factors and reversal factors performed well over the past few years,but lost effectiveness recently.At the same time,indicators such as valuations,profitability stand out.Morgan Stanley pointed out in a recent research report that,compared to the period from 2010 to 2015,more stringent supervision and fierce competition have greatly reduced the effectiveness of the once popular quantitative investment strategy,making the investment income of the strategy drop sharply.All quantitative funds are rethinking how to improve and optimize the model.This article starts with the marketing style rotation,first introduces the basic multi-factor selection model in detail,and briefly introduces the style rotation.Taking HS 300 stocks as the stock pool.We first obtained six effective factors through validity test,and established multi-factor models after assigning different weights based on the single factor's excess return.The results showed that the model performed well in bear and bull markets,but not in stable period.And the model can generally outperform the HS300 Index.Then through statistical analysis,it is proved that there is indeed a roundrobin effect on the stock market in China's securities market.Two commonly used indicators of market sentiment are compared and analyzed: index-to-price ratios,index-to-amplitude ratios,comprehensive analysis to find that index-toprice ratios perform better,and the introduction of Bollinger Bands strategies to track the timing of small-and large-scale rounds.Finally,this paper applies the strategy of large and small wheel rotation to the multi-factor stock selection model.Specifically,it uses the HS300 stocks as the stock pool to select stocks when the blue chips stocks go strong,and partially invested in small-cap stock index when GEM go strong.The results show that the multi-factor model adding rotational effect can effectively reduce the losses in the bear market,and with the increase in the proportion of funds in the small-cap stock index,the stronger the effect,and the performance in the stationary period is slightly better than the HS300 Indexes and multi-factor models.This paper empirically confirms that the structured multi-factorial model of rotation can overcome the HS300 market index and provide reasonable advice for investors.