Portfolio Analysis Based on Hierarchical Linear Model
HE Xiao-qu · Dangdai jingji kexue · 2015
This paper conducts portfolio analysis based on hierarchical linear model and Sharpe single-index model. The model describes the relationship between each kind of asset and market index and seeks overall optimal solution by using simulated annealing algorithm through the target function to be optimized of Sharpe ratio structure model. This paper undertakes empirical analysis by using the data of actual stock market and draws the following main conclusions: 1. The models of this paper can accurately picture the relationship between a single stock and 300 index of Shanghai Stock Exchange and Shenzhen Stock Exchange. 2. The portfolio Sharpe ratio of hierarchical linear model is higher than that of linear regression model in training set and test set and this advantage is more significant in test set.