A Market Trend-Based Multi-Factor Alpha Model— withApplication in Taiwan Market

• Main Authors: Shao-yu Wang, 王紹宇
• Other Authors: Yih Jeng
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/48432728485404697686

碩士 === 國立中山大學 === 財務管理學系研究所 === 99 === While quantitative investment management has been extensively investigated and many models built in order to provide investment suggestions through quantitative analysis, the combination of quantitative and qualitative analysis is relatively unexplored. The objective of this study is to construct a quantitative stock selection model based on the standard model built by Hsu et al. (2011) which could improve the stability of descriptor and factor structures and the combinability of quantitative and qualitative analysis. The research focuses on the structure of effective factors and descriptors when faced with different types of market trends. Furthermore, we test the performance of a Market Trend-Based Alpha Model (MTB alpha model) and compare with the standard alpha model. The strategy of portfolio construction is a TAIEX enhanced index fund. We find the enhanced index portfolio constructed by the MTB model produces an information ratio of 0.72, which is much higher than the standard model ratio of 0.41. This finding suggests that a MTB model could not only improve performance but also make the descriptor and factor structures more stable and much more easily for managers’ adjusting.