An Empirical Study On Factor-based Stock Picking Strategy In Chinese Stock Market

In general,an industry refers to a group of companies that can provide the same type of products or services.Each listed company has a clear industry ownership according to the SFC industry classification criteria.Internationally,Standard & Poor's(S&P)and Morgan Stanley(MSCI)have developed the Global Industry Classification Standard(GICS),which aims to provide the global financial industry with a comprehensive and unified economic sector and industry definition.GICS is a An industry-specific division criteria for investment.Usually,each industry in the stock market is treated differently by the market,and its performance is different in the industry index price.An important way to capture excess returns in the market is through industry allocation,which is also an important direction in investment research.Empirical studies abroad have shown that industry allocation contributes most of the benefits to mutual funds.In mature markets,industry allocation is the primary consideration in building a portfolio,with a higher priority than individual stock options.As the economic cycle changes,hotspots in the market are constantly changing.In certain market environment,economic environment and policy environment,there are differences in the performance of industry indices.Even some industry indexes will have independent market conditions.This is an important prerequisite for dynamic industry allocation to obtain excess profits.How to effectively allocate the industry in the process of investment practice is of great significance not only in theory but also in investment practice.Multi-factor model is a classic model of modern financial pricing theory research process.With the rapid development of computer and information technology,multi-factor model is widely used in quantitative transactions.In the process of industry configuration,multi-factor model is also an important analysis tool.This paper selects multiple industry factors to establish a dominant industry.Within the dominant industry,it deeply explores the characteristics of the industry,and applies individual stocks to effectively select the leading stocks in the industry to build a portfolio.Through the selection of multiple style factors,the industry's multi-factor and multi-factor model of the industry's multi-factor model is proved.Based on the investment logic of “first select industry,then select company”,the combination strategy of industry and individual stocks is verified.The industry index can obtain excess returns and is an effective active investment strategy.