Optimization in China : comparing factor, sector, and synthesized investment strategies

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Wu, Baoxiu and Zhou, Long (2025) Optimization in China : comparing factor, sector, and synthesized investment strategies. Applied Economics. pp. 1-12. ISSN 0003-6846 (https://doi.org/10.1080/00036846.2025.2590772)

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Abstract

This study explores the effectiveness of factor-based, sector-based, and hybrid investment strategies in the dynamic Chinese stock market, employing six advanced portfolio optimization techniques: equally weighted, risk parity, minimum variance, mean-variance, Bayes-Stein, and Black-Litterman. By analysing five key factors and ten industry sectors, we demonstrate that hybrid strategies, which integrate factor and sector allocations, consistently deliver superior risk-adjusted returns across diverse market conditions. While factor-based approaches excel in stable periods, sector-based strategies provide resilience during financial turbulence. Our findings reveal that hybrid portfolios not only mitigate extreme risks but also exhibit lower turnover, enhancing cost efficiency. These results underscore the strategic value of combining factor and sector insights for robust asset allocation in emerging markets.

ORCID iDs

Wu, Baoxiu and Zhou, Long ORCID logoORCID: https://orcid.org/0000-0001-9687-1406;
  • Item type:Article
    ID code:94745
    Dates:
    Date
    Event
    27 November 2025
    Published
    27 November 2025
    Published Online
    11 November 2025
    Accepted
    Subjects:Social Sciences > Economic Theory
    Department:?? 15452 ??
    Depositing user: Pure Administrator
    Date deposited:17 Nov 2025 22:44
    Last modified:04 Feb 2026 08:18
    URI:https://strathprints.strath.ac.uk/id/eprint/94745
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