Application of Quantitative Methods in Asset Allocation Based on the Chinese Capital Market

Abstract

Investors’ demand for asset management products is rising; however, traditional asset allocation models are facing difficulties in playing a full role due to the restrictions on the investment scope and the limitation of the accuracy of fund manager’s subjective judgments. The application of traditional asset allocation model necessitates knowledge about the expected returns, future trends, or risk scopes of assets. This study holds that the quantitative method based on macroeconomic logic is one of the solutions. Beginning from the macro-cycle, this study analyzes the logical chain behind the application of the momentum effect and contrarian effect to stock index allocation and stock bond allocation, verifies their effectiveness, as well as explores relevant strategies using data from 2010 to 2021. Therefore, when the accuracy of subjective views cannot be guaranteed, it is a good idea to form a benchmark scheme with generalized quantitative methods based on financial market logic, and then make subjective adjustments.