Research On Asset Allocation Strategy Of China's Financial Market Based On The Principle Of Merrill Lynch Investment Clock

Merrill Clock is an asset allocation strategy based on economy cycle that suit the mature capital market well in developed countries.In the beginning,the GDP growth rate and CPI Index are selected as output index and inflation index separately to devide the economy cycle of China.Then,through Descriptive Statistical analysis,it is observed that there are some characteristics of cycle rotation in the Large class assets and equity assets in China's financial market,which are not completely consistent with the investment theory of Merrill lynch clock.Based on this phenomenon,statistical test method is introduced,including parametric test methods(ANOVA test & multiple comparison test)and non-parametric test(K-W test)to verify the Periodic feature of Large class assets and equity assets in China.Because the risks characters are different between assets,the VaR and CVaR method are introduced to measure the risk of Large class assets and equity assets in China.And then,"Mean – CVaR” model are designed to obtain the best Allocation Strategy of Large class assets and Equity assets in each economy period.Then,the China scheme of Merrill Lynch Clock is put forward:(1)In the Recovery Period,Bonds and Commodities are the most suitable Large Class assets for allocation,while Non-Ferrous metals and National defense and military industries are the most suitable assets for allocation.At the same time,the investor should protect the potential risk from computer,media and integrated industries.(2)In the Overheated Period,Bonds and Commodities are the most suitable Large Class assets for allocation,while Non-bank Finance,Food and Beverage are the most suitable assets for allocation.At the same time,the investor should protect the potential risk from Electronic components,Media and Integrated industries.(3)In the Stagflation,The best Large Class asset is Cash,fund and bond also have a certain of value,the period is not suitable for equity investment,but the Agriculture,forestry and fishing and Basic chemical industry will bring a little benefits,at the same time,investors need to guard against the risk from Silver industry and Petrochemical industry.(4)In the recession,bonds are the best asset to allocate,while cash and stocks also have certain allocation value.Non-bank financial and Power equipment are the best asset to allocate,while steel and transportation are the worst asset to purchase.After the China's scheme of Merrill Lynch Clock put forward,The author observed that because investors do not have ability to identify the economic cycle accurately,the Merrill Lynch Clock investment principle can not be effectively applied in the investment in the Real-World.In order to solve this problem,this paper combines the momentum effect principle with Merrill Lynch clock theory to design a "single asset momentum allocation strategy",and then "Joint Asset Momentum Allocation Strategy" which based on the "single asset momentum allocation strategy" is designed,the Inside and Outside Sample test prove that the "single asset momentum allocation strategy" is effective to solve the flaw in Merrill Lynch investment clock...