Research On Industry Asset Allocation Of A-share Market Based On Economic Cycle Under Investment Clock

Since the release of the Merrill Lynch Clock study,it has attracted the attention and research of global investors because of the simple and effective investment rules formed by different asset allocation under different economic cycles.Chinese stock market has been established for more than 30 years,the scale is growing,the volatility is still sharp.With the rise of quantitative investment in our country,all kinds of quantitative investment transactions have mushroomed,but the existing quantitative investment research on the asset allocation of industry,and the correlation between industrial asset allocation and macroeconomic research is insufficient.In addition,institutional investors have limited research depth on industrial asset allocation phenomenon,while academic circles pay insufficient attention to the problem.Based on this situation,this thesis studies the allocation of industrial assets under different economic cycles.As the basic part at the beginning of this thesis,the output gap and CPI month-on-month growth rate are selected to represent economic growth indicators and inflation indicators by referring to the Merrill Lynch clock.According to the four-point method,the period 2012-2021 is divided into four different economic cycle stages: recovery,overheating,stagflation and recession.Secondly,the necessity and feasibility of industrial asset allocation are tested: First,the necessity of industrial asset allocation in investment is tested through the measurement of non-systemic risks of various industries,and the single index model is used to regression the industrial yield data and the return of Shanghai Composite Index.The goodness of fit(R2)represents systemic risk,and 1-R2 represents non-systemic risk,namely industrial risk.The results showed that the average industrial risk accounted for41.2% of the total risk in 31 Shenwan first-level industries,and the industrial risk accounted for a larger proportion of the total risk,and the lowest proportion was more than 20%,indicating that the industrial risk of each industry can not be ignored,and there is the necessity of industrial asset allocation in actual investment.Second,a simple statistical analysis is made on the returns of various industries in different stages of the economic cycle from 2012 to 2021.Statistics show that there do exist industries with good earnings performance in specific economic cycle stages.In the recovery period of China,non-banking financial industry and power equipment industry have better earnings performance.The defence,steel and car industries do better in overheated periods;In the stagflation period,pharmaceutical biology,computer and beauty care do well;The food and beverage and property sectors have done better in the recession.Under such an ideal economic cyclic-based industrial asset allocation strategy,with monthly position adjustment and 0.3% transaction cost set,the net value from 2012 to 2021 will reach6.1463,far exceeding the return of the CSI 300 Index in the same period.Then,through the establishment of 31 SVAR models of the return rate of 31 Shenwan first-level industries and the return rate of Shanghai Composite Index,output gap and CPI year-on-year growth rate,the correlation between each industry and output gap and CPI year-on-year growth rate is investigated.Impulse response and variance decomposition in the SVAR model were used to determine the impact of output gap and CPI year-on-year growth rate on the rate of return of each industry.The variance contribution of output gap and CPI year-on-year growth rate on the rate of return of the industry was taken as the business cycle sensitivity of the industry,and the top 15 industries with high business cycle sensitivity were selected.Combined with the rate of return performance of different economic cycles,an industrial asset allocation strategy scheme based on economic cycles was established.The results showed that: coal and agriculture,forestry,husbandry and fishery industries were allocated in the recovery stage,building materials and environmental protection industries were allocated in the overheating stage,pharmaceutical,biological and beauty care industries were allocated in the stagflation stage,and food and beverage industries were allocated in the recession stage.In the case of monthly adjustment and 0.3% transaction cost,the industrial asset allocation model established in this thesis will reach 4.6977 net value from 2012 to 2021,far exceeding the 2.1061 net value of CSI 300 Index in the same period.The annualized return is 16.73%,and the maximum retracting is 35.58%.The biggest pullback occurred from May 2018 to December 2018,during the one-sided decline of 2018.It shows that the industrial asset allocation model based on economic cycle established in this thesis can obtain excess returns,provide investors with reliable and effective industrial asset allocation strategies,and directly and efficiently guide investors to make investments,obtain excess returns and diversify risks.The analysis of the influence of the rigorous economic cycle on the industry index is helpful for the investors to deepen the understanding of the volatility of the Chinese stock market,and can make up for the shortage of the existing quantitative investment on the industry asset allocation research.In addition,the rules and transmission mechanism of industry rotation phenomenon revealed in this thesis also bring intuitive reference to the regulators,which will help the stock market regulators and management to grasp the market volatility rules and investors’ investment behavior,and then formulate relevant and feasible systems and policies,so as to escort the healthy and steady development of our stock market.Further provide enterprises with a good investment and financing environment.