Taiwan multifactor model construction equity market neutral strategies application

Purpose With the development of the modern portfolio theory and the advancement of information technology, the employment of quantitative approaches to practically measure asset risks and returns, and the construction of portfolios even dynamic portfolios has become possible and popular. Therefore, the purpose of this paper is to construct a multifactor model for Taiwan stock universe using fundamental technical descriptors and then to apply the equity market neutral investing using multiplefactor models as a tool. Designmethodologyapproach This study constructs a Taiwan equity multifactor model using crosssectional fundamental technical approach. Findings The model involves 28 explanatory factors including 20 industry factors, and the results of the estimations are satisfactory. The model's explanatory power is 58.6 per cent on average. Furthermore, this multifactor model is feasible, modulized, dynamic i.e. modified over time and updating. Originalityvalue The multifactor model, constructed and utilized in this study, is a useful and feasible tool. It generates important inputs into the applications of building market neutral portfolio. Purpose Taiwan OTC market is an electronic, order driven, call market. The purpose of this paper is to gain understanding of whether trade size or number of transaction provides more information on explaining price volatility and market liquidity in this market. The paper also aims to investigate how market condition can affect the relationship between information type and trading activities. Designmethodologyapproach The paper uses data from the Taiwan OTC market to run the empirical tests. It divides firms into five size groups based on their market capitalization. Regression equations are run to test whether number of transactions has a more significant impact on price volatility on the Taiwan OTC market the impact of market information on number of transactions the relative impact of firm specific and market information on number of transactions and the impact of number of transaction of bidask spread. Findings Findings show that the larger the number of transactions, the higher the price volatility. Smaller firms on the Taiwan OTC market are traded based on firmspecific information. This relation is further affected by market trends. Especially for the larger firms, when the market is up and the amount of market information increases, number of transactions increases. When the market is down and the amount of market