What is quantitative investment? What are the strategies for quantitative investment?

Quantitative investment - diligent and rational investment practitioners

Quantitative investment, in simple terms, is the process of using computer technology and mathematical models to implement investment strategies. According to the above definition, if we understand it, we just need to remember3Keywords:

Mathematical model: requires mathematical formulas or models for calculation;

Computer technology: using computers for automated transactions;

Investment strategy: Form this method into a conventional investment strategy.

We all know that everyone is relatively rational, and investing is easily influenced by emotions and produces biases. The biggest advantage of quantitative investment driven by robots is that they can achieve absolute rationality in certain aspects, such as stopping gains or losses. Because it can overcome human indecision and greed.

Admittedly, quantitative investment has only emerged in recent years domestically, but its development abroad has surpassed50The history of the year.

1969In, Edward Thorpe utilized his invention"Scientific Stock Market System"(Actually, it is a stock warrant pricing model)Established the first quantitative investment fund. The fund is named Princeton-Newport Partnership Fund mainly engages in arbitrage of convertible bonds. Surprisingly, the fund has been continuously established11There were no annual losses during the year and continued to outperform the S&P index. Quantitative investment has successfully attracted people's attention!

After nearly half a century of development, as of2016At the end of the year, the total size of global quantitative investment funds has exceeded3Trillion US dollars, which is the proportion of global fund size30%about.

In China,2010The year can be said to be the first year of China's quantitative investment, Shanghai and Shenzhen300stock market indexfuturesThe launchETFThe rapid development of tiered funds has put various quantitative strategies into use. At the same time, both public and private funds have issued a large number of quantitative strategy funds. Especially in private equity funds, quantitative private placement has developed rapidly in recent years. Understanding private equity funds requires the use of some portal websites, such as private equity ranking websites, where many private equity funds are exempt from subscription fees. I won't expand on it here.

What are the strategies for quantitative investment?

According to the three keywords summarized by Paipaijun, its investment strategy can also be basically developed on this basis. For the convenience of understanding, Paipaijun will simply classify quantitative strategies into the following categories:

1Quantitative hedging

In fact, quantification and hedging are not a "family" in themselves. The reason why they can ultimately become a "family" is because the combination of the two can obtain the "crystallization" of excess returns.

For example, Paipaijun uses quantitative methods to select an index that can outperform10%And buy the stock. When the market rises20%At that time, Pai Pai Jun's stock rose30%. But Pai Pai Jun has already done hedging operations, namely short selling the index(Short selling stock index futures)So it will be lost in shorting the index20%Benefits of(Short selling means bearish)One increase and one decrease in this way will result in a net profit10%;On the contrary, if the market falls20%The platoon leader will lose10%But due to the previous short selling of the index, the platoon leader will earn money due to short selling20%One decrease and one increase still make a net profit10%。

Isn't it amazing?!This is the charm of quantitative hedging!And this method is also known as market neutral strategy.

2Multi factor stock selection model

The specific stock selection model is very complex, but don't be afraid!The principle is very simple.

Multi factor stock selection refers to selecting stocks based on multiple factors as reference standards, which is the same as finding a job, finding a house, and so on, but its name is just too high.

When looking for a job, we need to consider its salary level factor, company development prospects factor, job matching factor, and so on. When looking for a house, one should consider its transportation facilities, community hygiene, noise, safety factors, and so on. So, stock selection is also the same. However, there are many factors for stock selection, and experts have divided these factors into four categories: technology, such as price, trading volume, volatility, etc;Fundamentals, such as value factors, growth factors, corporate debt factors, etc. Research, such as research reports, target prices, profit forecasts, ratings, etc. Other categories, such as institutional holdings, media attention factors, etc.

It is precisely because there are too many factors that it is impossible to comprehensively consider, so experts have developed a model to comprehensively weigh and consider based on the weight of the factors.

The Sharpe ratio is one of the indicators used to measure the risk of private equity funds, such as the Sharpe ratio of a certain fund2This means that every fluctuation in the returns of stocks or bonds it invests in1Yuan(Take on the risk of one unit)Will bring to the fund2Yuan(Obtaining corresponding unit income)Benefits.

The purpose of introducing multiple factors is to make returns more robust and less volatile. The more factors to consider when looking for a house, the better the final choice may be;When looking for a job, a balanced position may be more satisfying for you. If we switch to quantitative investment, the higher the Sharpe ratio, the higher the unit return brought by unit risk. Conversely, the fluctuation of unit return will cause smaller unit risk fluctuations. So, the more factors introduced, the more robust the return and the smoother the return curve.

We can see that as the number of factors increases in the graph, the change in its return curve becomes smoother and smoother. The number of factors is determined by30To become120During the process, its Sharpe ratio also increased from0.8become2.2。

3Quantitative timing

Timing not only troubles investors, but also causes headaches for institutional investors. If quantitative stock selection solves the problem of excess returns, then quantitative timing solves the problem of relative returns.

The so-called quantitative timing refers to the application of various predictive indicators, analyzing and obtaining predictions about the future direction of the market. The commonly used timing methods include trend quantification timing, market sentiment quantification timing, etc.

Trend quantification timing

Trend quantification timing can be considered as a continuation of trend investment, and if the trend reverses, it is necessary to close positions and stop losses. Like trend investment, trend quantification timing has a lag, and can only be operated after a certain trend appears in the market.

Quantitative timing of market sentiment

Quantitative timing of market sentiment is to use the enthusiasm of investors to determine the direction of the trend. When investment sentiment is high and everyone actively enters the market, the market may continue to rise;When investors are in low spirits and constantly withdrawing from the market, the market may continue to decline.

Of course, there are other methods for quantitative timing, which will not be expanded here due to space limitations.