Research On Stock Selection Strategy Based On The Value Investing

The stock market in our country continues to grow,and the number and level of participants have also been diversified accordingly.Stock investors have also gradually focused on the intrinsic value of stocks by focusing only on short-term price trends.Under the current economic trend,stock selection strategy based on value investing can provide references for investors to make investment decisions,and also promote the healthy development of stock market.Based on the analysis of the internal factors such as the operating and financial status of listed companies,this paper focus on the growth and development potential of listed companies,and use fuzzy clustering technology to tap the financial fundamentals of listed companies to extract relatively simple stock value feature set.Through relevant theory and empirical analysis,it is studied whether China's stock market is suitable for adopting value investment stock selection strategy.This paper proved that for a shares from May 2014 to May 2017,one-dimensional value investment stock selection strategy divided by B/M,E/P,C/P and retained earnings to market value has gained a positive rate of returns in both one-year and three-year windows through empirical analysis,and both exceed the risk-free rate of return.It shows that one-dimensional value investment stock selection strategy divided by B/M,E/P,C/P and retained earnings to market value is effective.This paper also proved that the two-dimensional value investment stock selection strategy based on four indicators include B/M,E/P,C/P,retained earnings to market value and growth in one-year and three-year windows has gained a higher rate of returns than the one-dimensional value investment selection strategy.This shows that on the basis of the one-dimensional value investment selection strategy,adding growth factor can achieve better investment effect.And through comparative analysis of the Sharpe ratios of these four strategies,it is proved that regardless of the one-dimensional value investment stock selection strategy or the two-dimensional value investment stock selection strategy,the Sharpe ratio is positive,indicating that the yield is higher than the bank deposit rate.The stocks selected using the B/M index as the standard compared with the stocks selected using the other three indexes as the criteria,the Sharpe ratio is the highest,that is to say,at a certain risk level,the yield is higher.Moreover,at a certain level of risk,the two-dimensional value investment stock selection strategy has a higher yield than the one-dimensional value investment stock selection strategy.