Optimizing a Chinese Dividend Strategy with Momentum and Inverse-Volatility Weights
Summary
This article presents a revised dividend-factor stock selection strategy for Chinese equities and a simpler equal-weight alternative using dividend-themed ETFs. The V2 stock strategy expands the portfolio from 8 to 20 holdings, rebalances monthly instead of daily, filters for positive six-month price momentum, and weights selected stocks in proportion to inverse volatility. It also raises the minimum trade threshold to reduce small transactions. The ETF alternative equally weights a basket of listed dividend ETFs and uses a backtest beginning in 2020.
The article reports that V2 improved its Sharpe ratio and maximum drawdown versus the earlier version, and gives separate return and drawdown claims for the ETF basket. It also discusses dividend yield and lower volatility as possible support during a market pullback. These results are the article's own backtest claims; the presented text omits the detailed performance tables and methodological checks. It does not establish that the results will persist, and proposed additions such as commodity or overseas-market ETFs are suggestions rather than evaluated extensions.
Key ideas
- The V2 stock strategy holds 20 names and rebalances on the first trading day of each month.
- A positive six-month momentum filter excludes stocks with negative price momentum.
- Inverse-volatility weighting assigns larger portfolio weights to less volatile selected stocks.
- An alternative equally weights a basket of Chinese dividend-themed ETFs.
- Reported performance is based on backtests, with detailed performance tables absent from the text.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.