Research On Investment Strategy Based On The Increase And Decrease Of Senior Executives’ Holdings In Listed Companies

At the end of 2006,China’s non-tradable share reform task was basically completed,which made the company’s shares fully circulated.Then,on July 13,2016,the Administrative Measures for Equity Incentive of Listed Companies was officially issued,which is the policy support and institutional guarantee for the equity incentive pilot of China’s listed companies.The non-tradable share reform and equity incentive policy have become the market basis for senior executives of China’s companies to increase or decrease their holdings of company shares.During the time span from September 24,2008 to July 8,2015,the Shanghai Stock Exchange,Shenzhen Stock Exchange and China Securities Regulatory Commission respectively issued relevant regulations to encourage the executives of listed companies to increase or decrease their holdings,so that they can be more flexible and better use the means of increasing or reducing their holdings in the securities market to safeguard their own interests,the interests of enterprises and the interests of other market participants,and also provide investors with more investment options.In order to protect their own interests,the executives of listed companies who hold shares in the company began to pay close attention to the company’s share price.However,because the executives are usually in a special position in the company,as the company’s operators control the business activities of the entire company,they often have access to first-hand information.As insiders of the company,they can also grasp more and more accurate internal information of the company than minority shareholders and ordinary external investors,In addition to their rational analysis of the company’s development prospects and capital operation trends,the increase and decrease of senior executives’ holdings often receive the close attention of small and medium-sized investors.General investors usually regard the increase and decrease of senior executives’ holdings as an investment signal.Therefore,this paper will first analyze the impact of the increase and decrease of senior executives’ holdings on the stock price of listed companies,and then conduct research on investment strategies based on this analysis result.This paper mainly selects the increase and decrease announcements of senior executives of listed companies in Shanghai and Shenzhen from 2017 to 2021 from the Wind database as the research sample.Based on the event research method,we first select 20 days before and after the event date as the event window,170 days before the event and 21 days before the event as the estimation window,and carry out the research and analysis on the increase and decrease of the overall sample respectively,and carry out the t-test analysis on the results.However,because the impact of the increase and decrease of senior executives on the stock price is only too general to analyze the overall sample in terms of the time span,Under different factors and conditions,the impact of the increase and decrease of senior executives’ holdings on the company’s share price will also vary.Therefore,this paper analyzes the heterogeneity of the increase and decrease of senior executives’ holdings in different sectors of the sample,the different proportion of the increase and decrease of senior executives’ holdings in the total number of shares,the different nature of enterprises and the different market trends of the sample,So as to further confirm the conditions under which the company’s shares have more investment value.Then,the cumulative average abnormal rate of return on the first day,the third day and the fifth day before and after the event were used as the explanatory variables to express the short-term impact of the increase or decrease in holdings on the stock price,and the nature of the enterprise,the ratio of increase or decrease in holdings,the cumulative average abnormal rate of return from the 20 trading days before the announcement of the increase or decrease in holdings to the five trading days before the announcement,the enterprise sector and the year index were used as the explanatory variables to estimate the parameters using the multiple regression model,Through the three window areas of t=1,3,and 5 selected by the explanatory variable CAAR [-t,t],three sets of regression analysis results are obtained to provide reference for future investment strategy research.Based on the empirical research results,since the earnings after the event of senior executives’ shareholding reduction are downward,general investors cannot build a long investment strategy after the announcement of senior executives’ shareholding reduction is released,so it is not included in the consideration of the construction of long investment strategy.For the event of senior executives’ shareholding increase,combining with the previous analysis results,we can get the state-owned enterprises under the conditions of the GEM market,and the event of senior executives’ shareholding increase of less than 1% as the investment target to build investment strategies has more investment value,Among them,when studying the event that the shareholding increase ratio is greater than 1%,it is found that the cumulative average abnormal rate of return continues to decline after the occurrence of the shareholding increase event and is far less than the cumulative average abnormal rate of return on the day of the event,so it has no investment value.After the investment strategy is constructed based on the above conditions,the investment back-test is carried out for each different holding period.The investment back-test indicators mainly include the return rate of investment strategy,annualized return rate,Alpha,Beta,Sharp ratio,return volatility and maximum withdrawal rate.After comprehensive analysis,it can be concluded that the optimal investment strategy is when the investment holding period is 3 and 5 days,among which,When investors pursue higher returns and have greater risk tolerance,the investment strategy with a holding period of 5 days is the best choice,while when investors have less risk tolerance,they can choose the investment strategy with a holding period of 3 days.