Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China

Research Article

Quantitative Portfolio Selection Based on Fama-French 3-Factor Model: An Empirical Research

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  • @INPROCEEDINGS{10.4108/eai.28-10-2022.2328427,
        author={Guowei  Chen and Yang  Jing and Tingjia  Zhang},
        title={Quantitative Portfolio Selection Based on Fama-French 3-Factor Model: An Empirical Research},
        proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China},
        publisher={EAI},
        proceedings_a={FFIT},
        year={2023},
        month={4},
        keywords={three-factor model; a-share market; book-to-market ratio; asset premium factor; scale factor},
        doi={10.4108/eai.28-10-2022.2328427}
    }
    
  • Guowei Chen
    Yang Jing
    Tingjia Zhang
    Year: 2023
    Quantitative Portfolio Selection Based on Fama-French 3-Factor Model: An Empirical Research
    FFIT
    EAI
    DOI: 10.4108/eai.28-10-2022.2328427
Guowei Chen1, Yang Jing2, Tingjia Zhang3,*
  • 1: Jiangxi University of Finance and Economics
  • 2: Xinhua College of Sun Yat-Sen University Dongguan
  • 3: Guangdong University of Finance Guangzhou
*Contact email: 17011010311@stu.suse.edu.cn

Abstract

This paper tries to take the monthly yield of 300 stocks in the CSI 300 Index in Chinese A shares market from January 2012 to December 2021 as the research object, making the stocks group through the size and book market value comparison. Fama-French three-factor model is used to perform regression analysis of the sample, and conduct stock selection strategy research based on the model. The study found that the three-factor model still has certain practicality in China's capital market, and investors can select stocks according to the three-factor model. Accordingly, this thesis believes that the fit of the three-factor model has dropped significantly compared with ten years ago, and the three-factor model will become less and less suitable for China's capital market in the future, which needs continuous optimization and improvement. The data comes from CSMAR database. This paper uses computer simulation to conduct stock selection by Stata. The study found that the three-factor model still has certain practicality in China's capital market, and investors can select stocks according to the three-factor model.