Quantitative investment in a large data age

Financial reform and financial innovation occupy a vital position in the future development of Shanghai. According to the overall development of the country launched the Shanghai Free Trade test area, and further promote the construction of four Shanghai Center, China's financial reform will provide a wealth of experience, will also bring huge investment opportunities. The gradual opening up of financial market will greatly promote the pace of financial innovation, bring more and more investment channels to investors, and accelerate the integration of Chinese financial market and international financial market. There is no doubt that many foreign mature investment tools and investment methods will gradually enter the Chinese market. With the futures market as the representative of the derivatives market will usher in rapid growth, the quantitative investment represented by the investment method will also be more attention to investors. Many investors still feel unfamiliar with the quantitative investments that have entered the public eye in recent years, thanks to their relatively strong technical (mathematics and computer) and the description of the mystery in many media outlets. I would like to combine the concept of quantitative investment and the development of foreign quantitative investment and share some views on China's quantitative investment development.

1. The core of quantitative investment is the quantification management of risk.

Rational investors in the pursuit of investment is not only the benefits, more importantly, the management of risk. The theoretical innovation of modern finance basically revolves around the management of financial risk, such as Markowitz's portfolio theory and Sharpe Capital Asset pricing model. Last year's Nobel laureate, Fama, proposed an investment model based on risk factor analysis. In the increasingly complex and vast capital market, how to measure the risk of various investment instruments and optimize the investment portfolio becomes more important, so the traditional qualitative investment method has been impacted and challenged. In this context, the emergence of quantitative investment in line with market demand, the use of quantitative methods and means to assess the risk, is a rigorous and transparent investment philosophy. For example, the more prevalent risk equilibrium (disorientated parity) model in foreign countries is a typical innovative model of seeking benefits from risk optimization, which has achieved great success in the past few years.

2. The development of large data processing technology provides strong technical support for quantitative investment.

Many scholars refer to the emergence of computers and the Internet as the third industrial revolution. In this era of rapid development of information technology, every industry is confronted with the challenges posed by the big data age. In the investment industry, the vast amount of information provided by various channels, as well as high-frequency financial transaction data, are profoundly affecting the development of the industry and the effectiveness of financial markets. The development of information systems and the progress of statistical tools provide investors with a possibility to yield large data. In the context of a large data age, the development of a variety of technologies for data processing will be applied in quantitative investments, bringing greater returns to investors.

3. Financial innovation provides a wealth of investment tools for investors looking to quantify investment.

Since the 1950s, financial markets have launched a number of innovative financial products, providing an increasingly rich investment tool, in the need to evade regulation, shift risk and prevent risks. Financial derivatives are increasingly important in the financial markets, and derivatives such as commodities, which are the subject of traditional equity and bond products, are booming. For example, the current Chinese derivatives market is the largest trading volume of commodity futures, the total amount of transactions is already 2.8 times times the gross domestic product. Overseas, the booming commodity futures market has also boosted the development of quantitative investment funds dedicated to investing in futures markets, such as the CTA, a hedge fund for commercial futures, in the world's 2.7 trillion dollar hedge fund market in late 2013, The asset size of the main investment futures has reached $400 billion trillion.

4. The prospects for quantitative investment in China are broad.

Compared with foreign financial markets, China's financial market is still in its infancy. In the traditional equity and bond markets, market regulation is relatively strict. The development of derivatives market is also relatively lagging behind. For example, the commodity futures market we mentioned earlier, although the current amount of transactions is already 2.8 times times the gross domestic product of China, but in the United States this ratio is 55 times times. However, the gap hides the potential for growth. We have seen the Chinese government's strategic vision and ambition in developing financial markets. The 18-session plenary of the party put forward the instruction spirit of "sound multi-level capital market system" and pointed out the direction for the development of capital market during the 35 period. With the increase in financial instruments, quantitative investment will show a greater role in helping investors to seek the best return on better risk control.