Dynamic Asset Allocation Of Stock Market

This paper first reviews the relevant literatures on portfolio theory and DCC-GARCH model at home and abroad.Then,from the perspective of program quantification,the paper verifies whether the AR-GARCH model,the DCC-GARCH model and the effective frontier analysis in the portfolio theory can reflect the increase of investment returns in the data regression by implementing the program quantification trading system on the third-party platform.The research target is the daily close price data of 50 stocks in the Shanghai Stock 50 index.By establishing the GARCH model based on the BIAS index,the average bias of the stock closing price to the average line is added on the original average line,and the traditional double-average trading system is improved,by trading stocks when the quick average line cross the slow average line.The trading system hold at most 5 stocks for easy comparing.The DCC-GARCH model is used to predict the next day’s fluctuation and dynamic correlation coefficients,and then Monte Carlo method is used to find the optimal configuration parameters on the effective frontier boundary.Through the gradual establishment of the trading system,after many data tests and adjustments of parameters,compared with the use of different statistical models,it does increase the returns of the trading system,and in more than two years of trading period obviously beat the benchmark Shanghai 50 index.Based on the theory of DCC-GARCH model and effective frontier analysis,this paper constructs a trading system through program quantification process,which is a beneficial attempt to the dynamic allocation of stock assets.