Return and volatility-managed portfolios: An investigation of China’s A-share market : A thesis submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy at Lincoln University

Abstract

China's A-share market is characterized by high volatility and a retail-dominated environment, which poses significant challenges for risk management. This study investigates the applicability and effectiveness of the Volatility Managed Portfolio (VMP) strategy in this market. The study begins by reviewing modern portfolio management theories, including single-factor and multi-factor models, and assesses their applicability and limitations in the context of China’s A-share market. Using a large sample of historical trading data, the study constructs relevant risk factors and employs regression analysis to evaluate the performance of the VMP strategy. The strategy is further optimized to enhance its adaptability to different market conditions. The findings show that the VMP strategy improves risk-adjusted returns across various market phases and demonstrates strong risk control, especially in periods of high market volatility. These findings provide empirical evidence for implementing such risk management strategies in volatile markets. This research not only contributes to the application of modern portfolio management theories in China's financial markets but also offers valuable insights for investors seeking to improve risk management in turbulent market environments. Future research could explore the integration of volatility management strategies with other investment approaches to further enhance investment performance and risk control.