Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023)

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Portfolio Selection Effectiveness Based on Absolute Parity Premium: Evidence from Convertible Bond Factor

Authors
Haiyi Li1, Qianya Ma2, Hongmin Sun3, *
1School of Economics, Sichuan University, Chengdu, China
2School of International Economics, China Foreign Affairs University, Beijing, China
3School of Accounting, Beijing Wuzi University, Beijing, China
*Corresponding author. Email: 1921430047@bwu.edu.cn
Corresponding Author
Hongmin Sun
Available Online 15 May 2023.
DOI
10.2991/978-94-6463-142-5_4How to use a DOI?
Keywords
convertible bonds; parity premium CAPM model; Fama-French three-factor model
Abstract

In the past, financial analysis mostly relied on subjective judgment, but with the improvement of the tools brought about by the development of The Times, the use of quantitative tools has become more and more important in financial investment. As an easy to use and expanding computer language, Python is also widely used in quantitative finance. China’s convertible bond market has entered a phase of rapid development since 2017. In this paper, in addition to the traditional research on convertible bond indicators, an innovative research factor of absolute parity premium is cited as a research factor of convertible bonds use Python to back-test and analyze the convertible bond market in the past three years. The results indicate that the absolute parity premium indicator has predictive power for the future return of convertible bonds, and investing in convertible bonds with lower absolute parity premiums can bring significant excess returns. The significance of this paper is to discover and prove the quantitative investment strategy of absolute parity premium bond selection, which provides a new way of thinking for convertible bond investment research.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023)
Series
Advances in Economics, Business and Management Research
Publication Date
15 May 2023
ISBN
10.2991/978-94-6463-142-5_4
ISSN
2352-5428
DOI
10.2991/978-94-6463-142-5_4How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Haiyi Li
AU  - Qianya Ma
AU  - Hongmin Sun
PY  - 2023
DA  - 2023/05/15
TI  - Portfolio Selection Effectiveness Based on Absolute Parity Premium: Evidence from Convertible Bond Factor
BT  - Proceedings of the 8th International Conference on Financial Innovation and Economic Development (ICFIED 2023)
PB  - Atlantis Press
SP  - 24
EP  - 38
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-142-5_4
DO  - 10.2991/978-94-6463-142-5_4
ID  - Li2023
ER  -