Research on the Investment Value of Hybrid Funds in the Chinese Capital Market based on Factor Analysis

Abstract

Factor analysis is a cutting-edge and effective data processing method that has a wide range of uses in the field of finance, as it can reduce the numerous indicators in finance into a few valid common factors in the form of factor analysis. The researcher can name the factors by the percentage contribution of each variable in the different factors. After that, the scores of financial products (e.g., stocks, funds) on different factors give a clear picture of how well the product performs in these aspects. The main research direction of this paper is to reduce the dimensionality of each index of hybrid funds in the Chinese fund market through the factor analysis technique to get reasonable public factors. And to rank these funds with factor scores to get the best funds among these ninety hybrid funds to make recommendations for investors. Finally, this paper successfully selects four excellent hybrid funds, which have excellent performance in terms of size, earnings, and debt-servicing ability, which can provide some reasonable suggestions for investors who want to invest in Chinese hybrid funds.