In the afternoon of October 20, the 6th World Internet Conference Sub-Forum themed “FinTech: Deep Integration & Multi-Directional Empowerment” was successfully held in Wuzhen, Zhejiang. The event was hosted by the People’s Bank of China and co-organized by the PBC School of Finance, Tsinghua University, Ant Financial Services Group and Du Xiaoman Financial. Zhang Xiaoyan, Associate Dean of Tsinghua PBCSF and Deputy Director of the Fintech Research Institute, Tsinghua University, shared her views about investment empowerment of financial technology (“FinTech”).
The deep integration and development of FinTech will bring changes to individual investment approaches of ordinary people and help them manage their “wallets” in a more scientific and intelligent way.
For most people, their purpose of investment is to increase gains and lower risks. The team led by Zhang lately sorted through China’s A-share investment data since 2014 and found that there are approximately over 40 million individual investor accounts in the country now, accounting for more than 90% of the total investment accounts. The daily trading volume of individual investors represents over 80% of the stock exchanges’ total, but their shareholdings only account for 20% of the total stock value on the stock exchanges. Did these individual investors make any money? Unfortunately, most of them did not. But why not? Maybe they traded too frequently, but the primary reason lies in their relatively poor ability to select stocks and the investment timing.
If individual investors fail to beat the general market, FinTech may help them change their investment performance.
In relatively developed financial markets, artificial intelligence, machine learning and other algorithms have grown relatively mature, and can already make excess earnings. Zhang Xiaoyan’s team studied and estimated the performance of the machine learning (“ML”) algorithm in China’s stock market. The result shows, if they simply invested in the market without employing the algorithm, the annual rate of return from 2010 up to now would be around 3%-4%; but if they applied a simple ML algorithm, the rate of return would reach 15%; if a relatively advanced ML algorithm was used, like the neural network algorithm, the figure could hit 30%, even when the annualized volatility was below 20%. Zhang Xiaoyan hence believes, when ordinary people have no confidence in their own ability to select stocks or the investment timing, they can choose a trustworthy institution and let the power of FinTech help them boost earnings, diversify risks and protect their investments. FinTech can not only change industries, but also the investing life of individuals.