Research On Quantitative Stock Selection Strategy Based On Multi-factor Model

As the main position of China’s securities market,the a-share market has experienced several replacement of bulls and bears in the past 30 years.Generally speaking,its market efficiency is constantly improving,but the emotional performance of chasing the rise and killing the fall still exists.How to help investors avoid irrational operation,reduce investment risk,quantitative investment is one of the more feasible models.Quantitative investment originated from the west and is widely used and becoming mature in the capital markets of Europe and the United States,but it appears late in the domestic financial market and needs to be further studied and optimized.This paper focuses on the multi-factor asset pricing theory,which is one of the most core and fundamental theories in quantitative investment stock selection.This paper collects and sorts out the literature related to the theory of multi-factor asset pricing and quantitative investment,analyzes and sorts out its development context.Then,according to data processing,factor design,empirical test,sorting and grouping,hedging and position adjustment,comparative analysis and other six steps to carry out the main research,design a annualized rate of return,high sharpe rate,reasonable factor stock selection strategy.This paper introduces the active factor with the market value growth rate as the proxy variable and the liability factor with the balance of asset-liability ratio as the proxy variable through theoretical exploration to build an eight-factor model.After the review and correction of the regression cycle,based on the grouping and overall empirical analysis of the a-share market in China,it is found that the new eight-factor model has stronger explanatory ability,and the machine learning method is used to draw A diagram to demonstrate its effect.The active factor and the liability factor have negative and positive influences on the excess return rate respectively,indicating that the companies with fast market value growth are unfavorable to the future return of investors,while the companies with low and high asset-liability ratio aremore likely to make profits for investors.Under the background of the comprehensive deepening reform of the securities market,this paper studies the asset pricing problem of China’s a-shares,finds and constructs two factors of activity and liability,sets up an eight-factor model,and designs an effective quantitative stock selection strategy based on this.This innovative exploration and research further explored the effective factors of China’s a-share market,improved the explanatory validity of the multi-factor capital asset pricing model,clarified the advantages and disadvantages of the effectiveness of China’s securities market,and enriched the types of quantitative factor stock selection strategies.At the same time,it also provides corresponding reference ideas,policy Suggestions and theoretical basis for investors to obtain reasonable returns,the government to improve and open the financial market,and the whole society to improve the efficiency of resource allocation.