本文以實務為導向，利用基礎橫斷面法(fundamental cross-sectional approach)建構了台灣股市多因子模型。 研究發現，本模型適用28個解釋因子(含20個產業因子)，其解釋能力為58.6%(平均而言)，此結果是相當令人滿意的。
此外，本研究以所建構的多因子模型為基礎，利用量化技術(quantitative techniques)模擬了股票市場中立策略之應用，期間為2003.1-2003.12。模擬結果證明了股票市場中立策略投資組合的三個主要特徵: 1)提供絕對報酬；2)與標竿表現(台股市場)相關性低；3)由於避險投組結構而呈現低風險(波動性)現象。

This Thesis attempts to construct a Taiwan equity multi-factor model using fundamental cross-sectional approach step by step. It is found that the model involves 28 explanatory factors (including 20 industry factors) and its explanatory power is 58.6% on average. The results of the estimations can be considered very satisfactory.
Moreover, based on MFM, this study simulates applications of equity market neutral strategies through quantitative techniques over the period Jan.2003 – Dec.2003. The results verified that the three major characteristics of equity market neutral portfolio performance are: 1) providing absolute return; 2) lack of correlation to the equity benchmark; and 3) low volatility due to hedged portfolio structures.

Contents
I. Introduction and Background ……………………………………… 1
1.1 Hedge Fund Strategies……………..……………………………… 1
1.2 Modern Portfolio Theory and Multi-factor Model …………..…………… 3
1.3 The objective of this study …..………………………………………….. 4
1.4 Overview of the Thesis ….…..………………………………………….. 4
II. Multi-factor Risk Models ……….…..…………………………………… 5
2.1 Defining Multiple Factor Models …..………………………………........ 5
2.2 The Mathematics of Multi-factor Models ……………………………….. 6
2.3 Methodologies to Construct MFMs …………………………………….. 9
III. Equity Market Neutral Investing Strategy …………………………... 12
3.1 Defining Market Neutrality …………………………………………....... 12
3.2 Building a Long-Short Equity Portfolio ……………………………........ 14
3.3 Absolute Return of Market Neutrality …………………………………… 15
3.4 Costs for Market Neutral Investing ……………………………………... 19
3.5 Risks of Market Neutrality ………………………………………………. 20
3.6 Three Market Neutral Portfolio Construction Techniques ………........... 21
IV. Empirical Study of Taiwan MFM ……………………………………… 23
4.1 Data Sample ……………………………………………………………. 23
4.2 Methodologies of Modeling the Taiwan MFM ………………………….. 24
4.3 Empirical Results of Multi-factor Model ………………………………… 37
4.3.1 Factors Choose and Factor Exposures Capture …………………. 38
4.3.2 Factor Returns Estimation …………………………………..……. 38
4.3.3 Covariance Matrix Calculation ………………………..………….. 40
4.3.4 Specific Risk Matrix Forecasting ………………..………………… 42
4.3.5 Analysis of Empirical Result for MFM ………………..…………… 42
V. Application of Equity Market Neutral Risk Hedge Strategy …….… 45
5.1 Techniques of Market Neutral Portfolio Construction ………………….. 45
5.2 Simulation of Market Neutral Strategy Investing ……………………….. 48
5.3 Results of Market Neutral Risk Hedge Strategy Simulation ……........... 52
VI. Summary and Conclusion …………………………………………….. 55
References ……………...……………………………………………………. 58
Appendix A : Descriptor Definitions ............................................................. 61
Appendix B: The Contrast Table of Common Factor and its Abbreviation......... 68

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