Does QFII Uphold Value Investment? Evidence from China
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Li Qiang, Dong Yaowu, Jin Zhenhu
The Basic Law and investment idea of value investment is widely used in developed Western financial market, but it still needs to be verified in the emerging and transition China. In this paper, the QFII investment strategy is feasible in China, that is, the ASV-GPD model is the marginal distribution function, and the correlation between QFII and HS300 index is studied by using four kinds of copula cluster methods. It is concerned with the statistical modeling of the dependence structure of QFII and HS300 index using the theory of Copulas. We select four Copulas and identify the type of dependency to capture nonlinear asymmetric and tail dependence. The GPD model needs to estimate the threshold values in order to exactly fit the margin distribution of Copula functions. Our analysis is based on a semi-parametric extreme value model. EV Copulas, Archimax Copulas and Archimedean Copulas simulate the correlation between QFII index and HS300 index. The empirical analysis indicates that the BB1 Copula has a higher correlation in the lower tail than the upper tail for a variety of parameters used in the Copula function. These findings illustrate that two different return series are more likely to correlate with each other during market downturns than upturns. Moreover, the backtesting results show that Copula-ASV-GPD model is suitable for measurement of tail risk of QFII and HS300 portfolio. In addition, we find the striking evidence of QFII value investment in Chinese A-share stock market for the period 2006-2018. Meanwhile QFII institutional investors gradually increase and the improvement of listed companies’ profit sharing system so that there is an opportunity for the rational return of value investment in Chinese stock markets.
Copulas function; Tail dependence structure; Value investment; Value at Risk; QFII stock Index