A portfolio strategy of stock market based on mean-MF-X-DMA model. (February 2021)

• Record Type: Journal Article
• Authors: Wang, Feng; Ye, Xin; Chen, HongTao; Wu, Congxin
• Is Part Of: Chaos, solitons and fractals. Volume 143(2021)
• Publication Date: 2021-02
• Subjects: Portfolio -- Fractal characteristics -- Semi-variance -- MF-X-DMA; Chaotic behavior in systems -- Periodicals; Solitons -- Periodicals; Fractals -- Periodicals; Chaotic behavior in systems; Fractals; Solitons; Periodicals; 003.7
• DOI: 10.1016/j.chaos.2020.110645
• Languages: English
• ISSNs: 0960-0779

Abstract

Highlights: A portfolio model was constructed by combining mean-semi-variance model and MF-X-DMA. The mean-MF-X-DMA model performs well than the traditional model in some criterions. The performance of mean-MF-X-DMA model was improved with the increase of scale. Abstract: In this study, the multifractal detrended moving-average cross-correlation analysis (MF-X-DMA) is combined with the Mean-Semi-Variance model to establish a Mean-MF-X-DMA model. This model is used to construct portfolio strategies by the stocks with the larger market value in each sector of the Standard and Poor's 500 Index (S&P 500). The empirical test shows that: firstly, there are long memory and obvious multifractal characteristics in each stock returns; secondly, the portfolio strategy based on Mean-MF-X-DMA model performs better than the traditional portfolio model, such as returns, Sharpe ratio, β coefficient and utility for different risk preference investors; finally, the risk will be lower when the time scale is smaller under the same expected returns.