Constructing a Multi-factor Investing Strategy – An Empirical Study in Taiwan Stock market

• Main Authors: Yu, Ling-Hua, 余羚華
• Other Authors: Lee, Jie-Haun
• Format: Others
• Language: zh-TW
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/3556k9

碩士 === 國立政治大學 === 財務管理學系 === 106 === In this study, we examined six factors—size, book to market ratio, profitability, corporate governance, stock liquidity, and asset growth. We used the data of Taiwan stock market from 2000 to 2017, to examine whether these factors can serve as effective stock selection factors in Taiwan stock market, and bring potential excess returns for investors. we also combined the factors to conduct multi-factor investments, and compared the performance of different process of multi-factor stock selection. The empirical results show that while investing in Taiwan stock market through long-only strategy, selecting stocks by size, book to market ratio, profitability, corporate governance, and stock liquidity could continuously earn significant excess return. We also combined the factors selected, and found that multi-factor investments performed better than single-factor investment. It could not only take advantage of the effects of the single factor, but also reduce the portfolio risk. Among them, the five-factor investment which combined size, book to market ratio, profitability, corporate governance, and liquidity could have the best performance. As the investment period became longer, the five-factor investment could perform better by reducing the risk to the level close to the market. However, more factors do not guarantee better portfolio performance. Not only the effectiveness but the correlation between the factors should be considered. In addition, increasing the weight of effective factor could increase the excess return. In this study, we increase the weight of effective factors, and found that the portfolio performs better.