-The Application of Logic, Data, and Models in Macro Research and Asset Allocation
Today is Tuesday, March 23, 2021, and we welcome the first industry forum of this semester. We are honored to have invited Professor Tang Jun, Chief Analyst of Financial Engineering at Zhongtai Securities Research Institute, to give a keynote lecture titled "The Application of Logic, Data, and Models in Macro Research and Asset Allocation" for the faculty and students of the institute. Mr. Tang's lecture was rich in practical knowledge and thought-provoking. After the lecture, students actively interacted with Mr. Tang, raised questions, and patiently answered questions for each student. All the students present expressed that they had benefited greatly.
The lecture will be conducted from three aspects: firstly, how to combine the three elements of logic, data, and models together to cope with the randomness of the market; Secondly, Teacher Tang used two projects of his team at Zhongtai Securities as case studies to analyze in detail how they effectively utilized data, clarified logic, used the right model, and ultimately achieved good results; The third is a few suggestions for the on-site classmates, who are also about to become newcomers in the securities investment industry.
Teacher Tang first introduced that in learning, we often focus on model construction and parameter adjustment. However, Teacher Tang used a few simple examples to tell us that models often have errors, which mainly depend on the premise of data and logic. For example, there are two types of stock investors in the United States: highly educated intellectuals such as dentists and lawyers, and blue collar workers. They all participate in stock trading with almost the same returns, indicating that stock trading may not be closely related to educational ability. There is also an example of using the method of investing coins every year to decide whether to choose the Shanghai and Shenzhen 300 Index or others, and the results are similar to the overall returns. Therefore, the market is random and mainly depends on individual logical thinking ability.
Teacher Tang also introduced that both the random walk theory and the efficient market hypothesis have been strongly challenged, but the deviation of human intuitive perception may underestimate the randomness of the market; The macro dimension determines strategic asset allocation, so for forecasting, internal logic is important, followed by data accuracy. Only when the data is good, can it be accurately predicted by putting it into the model. Therefore, it tells us that in the future, modeling and analysis should be carried out while ensuring the accuracy and authenticity of the data.
Teacher Tang gave an example of the asset allocation system of Zhongtai Clock and explained that the biggest improvement of Zhongtai Clock to Merrill Lynch Clock is the addition of policy dimensions. In China, fiscal and monetary policies are important factors affecting the financial market, so they must be taken into account before making investment decisions. Thus, a Zhongtai Clock Asset Allocation Decision System was formed, which characterizes fundamentals (macro, meso, micro, short, medium, and long term) ->evaluates market expectations ->finds expected differences ->generates investment portfolios. In addition, Mr. Tang also introduced the case of the Zhongtai financial engineering team's accurate prediction of the trend of the COVID-19 epidemic and the accurate prediction of economic development under the epidemic. He once again emphasized the importance of data and the need to analyze it in conjunction with reality. For example, the comparison of COVID-19 epidemic between China and the United States, especially the selection of main reference data, is based on actual conditions.
Finally, Teacher Tang put forward the following suggestions for students who want to enter the field of securities investment: firstly, make good use of statistical knowledge and adhere to statistical common sense; Secondly, we should attach importance to the application of new data. In the era of big data, everything is interconnected, and perhaps an insignificant factor is closely related to the desired prediction results; Thirdly, we must pay attention to the changes in the rules of the financial market game. All investment decisions and risk predictions must be based on the country's financial and fiscal policies, otherwise they will inevitably fail.
Teacher Tang's lecture has ended, and the students are still unsatisfied. They further discuss their experiences and knowledge in investment decision-making, data utilization, model application, and other aspects with the teacher. Teacher Tang generously imparted knowledge and provided answers to everyone's questions one by one.
The industry forum has come to a successful conclusion, and we would like to thank Professor Tang Jun for his wonderful lecture. I also hope that students can continue to maintain their enthusiasm for learning and actively participate in industry forums and activities. I believe that the valuable experience of industry veterans will be of great benefit to students' future career development.
Image provided by: Cheng Yuanjiang
Contributors: Ma Yawei, Zhang Zhongqiu, Cheng Yuanjiang
