Dynamic Multi-factor Stock Trading Strategy Based On Style Rotation

In recent years,more and more information technology has penetrated into financial market.The ensuing quantitative investment technology is a transaction method that aims to obtain stable income by quantitatively studying the reasons for the changes in the price of various types of assets in the financial market and issuing trading orders through computer programs.The current quantitative investment technology has gradually stabilized its performance in the financial market.Its market share and market size continue to expand.In the future,more investors will recognize quantitative investment technology.This paper starts with the ubiquitous style rotation phenomenon in the stock market,focusing on the phenomenon of rotation between large-cap stocks and small-cap stocks under the style rotation phenomenon.First,the author selects two indices,CSI 300 and CSI 500,and uses their constituent stocks as representatives of large-cap stocks and small-cap stocks.Then the author uses the difference between the yields of the two indices to demonstrate the phenomenon of the rotation of between large-cap stocks and small-cap stocks in the A-share market in China.On the basis of the existence of rotation,the author adopted two methods of relative strength indicators to find the trend of the rotation of between large-cap stocks and small-cap stocks,and constructed Boolean to find the best change position.After comparing the performance of the pure exponential rolling cumulative yield under the two methods,a better method is selected.Then the author selects 14 selected factors,using the constituent stocks of CSI 300 and CSI 500 as the stock pool for the effective factor test.Using the values of IC mean and IR to screen out the effective factors,the author constructs two multi-factor stock selection models based on large-cap stocks and small-cap stocks.Two multi-factor models are able to outperform the CSI 300 and the CSI 500.Finally,the author combines the timing method selected in the previous article with two multi-factor stock selection models to form a dynamic multi-factor trading strategy based on the style rotation of stock market.The strategic thinking is that,after the timing strategy is judged,when the stock market is a large-cap stock advantage,the large-cap stock multi-factor model is used to trade.When the stock market is a small-cap stock advantage,the small-cap stock multi-factor model is used for trading.The paper confirms that the dynamic multi-factor model based on style rotation is better enough to outperform the simple multi-factor model of large-cap stocks and small-cap stocks,and achieve good yield performance,indicating that the addition of time selection based on style rotation has positive significance for the improvement of multi-factor model.In the future,this article can also provide investors with rational recommendations.