Investing in Global Equity Markets with Particular Emphasis on Chinese Stocks

44 Pages Posted: 10 Mar 2016

See all articles by John Guerard

John Guerard

McKinley Capital Management, LLC

Shijie Deng

Georgia Institute of Technology - The H. Milton Stewart School of Industrial & Systems Engineering (ISyE)

Robert Arthur Gillam

McKinley Capital Management, LLC

Harry Markowitz

University of California at San Diego

Ganlin Xu

Guidedchoice.com

Ziwei Wang

McKinley Capital Management, LLC

Date Written: Jan 20, 2016

Abstract

In this analysis of the risk and return of stocks in global markets, we build several models of stock selection and create optimized portfolios to outperform a global benchmark. We apply several applications of robust regression techniques in producing stock selection models and several Markowitz-based optimization techniques in portfolio construction in various global stock universes. We test separate Japanese and Chinese stock selection models because they are large markets, with large global benchmark weights or are frequently in the news. We find that (1) that robust regression applications are appropriate for modeling stock returns in global markets; and (2) mean-variance techniques continue to produce portfolios capable of generating excess returns above transactions costs; and (3) our models pass data mining tests such that the models produce statistically significant asset selection. We estimate expected return models in a global equity markets using a given stock selection model and generate statistically significant active returns from various portfolio construction techniques.

Keywords: mean-variance portfolio theory, stock selection, robust regression

Suggested Citation

Guerard, John and Deng, Shijie and Gillam, Robert Arthur and Markowitz, Harry and Xu, Ganlin and Wang, Ziwei, Investing in Global Equity Markets with Particular Emphasis on Chinese Stocks (Jan 20, 2016). Available at SSRN: https://ssrn.com/abstract=2744304 or http://dx.doi.org/10.2139/ssrn.2744304

John Guerard (Contact Author)

McKinley Capital Management, LLC ( email )

3301 C St # 500
Anchorage, AK 99503
United States

Shijie Deng

Georgia Institute of Technology - The H. Milton Stewart School of Industrial & Systems Engineering (ISyE) ( email )

765 Ferst Drive
Atlanta, GA 30332-0205
United States

Robert Arthur Gillam

McKinley Capital Management, LLC ( email )

3301 C St # 500
Anchorage, AK 99503
United States

Harry Markowitz

University of California at San Diego ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
(858) 534-3383 (Phone)

Ganlin Xu

Guidedchoice.com ( email )

8910 University Center Lane
Suite 400
San Diego, CA
United States

Ziwei Wang

McKinley Capital Management, LLC

3301 C St # 500
Anchorage, AK 99503
United States

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