scholarly journals Market Timing and Stock Selection Strategies in Shariah- Compliant Stock Portfolio

2021 ◽  
Vol 29 (2) ◽  
Author(s):  
Muhammad Akhimullah Abd Halim ◽  
Siti Masitah Elias ◽  
Karmila Hanim Kamil
Keyword(s):  
Moving Average ◽  
Market Timing ◽  
Individual Investors ◽  
Average Risk ◽  
Investment Strategies ◽  
Stock Selection ◽  
Selection Strategies ◽  
Stock Investment ◽  
Out Of Sample ◽  
Stock Allocation

This study focuses on market timing and stock selection strategies that could be implemented by individual investors of Shariah-compliant equity using the top ten constituents of the FTSE Bursa Malaysia Hijrah Shariah Index. Investors are assumed to enter and exit the stock market following the buy-and-sell signal from Moving Average Crossover. Meanwhile, for stock selection, this study aims to construct the optimal portfolio using the Sharpe Ratio Maximisation model and Naïve (1/N) portfolio. The level of market timing and selectivity skills of individual investors following the suggested investment strategies will be measured by using the Treynor-Mazuy model. The empirical results showed that the best Moving Average Crossover gave plausible trading frequencies and provided the most return to investors was the (1, 100, 0.01) strategy. Albeit, the stock allocation for the constructed portfolio was less diversified compared to the Naïve (1/N) portfolio, the composition of portfolio weights of the constructed portfolio was able to offer a more than average risk to reward ratio. Furthermore, in the out-of-sample framework, both portfolios outperformed the market benchmark. Unlike previous studies, this study backed tests the strategy and found that it was beneficial for individual investors of Shariah-compliant equities to enhance market timing and selectivity skills in stock investment.

scholarly journals A comparative study on domestic and foreign equity funds in Indonesia

2019 ◽  
Vol 6 (4) ◽  
pp. 54-61 ◽  
Author(s):  
I Gst Ngr Putu Adi Suartawan ◽  
Luh Gede Sri Artini
Keyword(s):  
Financial Services ◽  
Practical Implication ◽  
Market Timing ◽  
Sampling Technique ◽  
Investment Strategies ◽  
Stock Selection ◽  
Timing Ability ◽  
Significant Difference ◽  
Equity Funds ◽  
Better Than

The aim of this study is to analyze and compare the performance between domestic and foreign equity funds in Indonesia seen from the Treynor index, market timing, and stock selection ability. The population of this study is all equity funds registered in OJK (Financial Services Authority) in Indonesia, with a sample of 38 domestic equity funds and 25 foreign equity funds during the 2016-2018 period. The samples were collected by using a nonprobability sampling method with a purposive sampling technique. Data were analyzed using the Mann-Whitney U test. The results of this study show that the performance of foreign equity funds is better than the domestic equity funds seen from the Treynor index. The market timing ability of foreign equity funds is better than domestic equity funds. The stock selection ability of domestic equity funds is better than foreign equity funds. The practical implication of this study for investors and capital market players is to provide empirical evidence that there is a significant difference between the domestic and foreign equity funds performance in Indonesia, that can be considered in investment strategies. For investment companies that manage equity funds can be a reference to performance improvement, especially for negative performance.

scholarly journals The intensity of stock selection: A case of young Papuan investors

2019 ◽  
Vol 3 (1) ◽  
pp. 171-178
Author(s):  
Yohanes C. Seralurin ◽  
Yendra
Keyword(s):  
Quantitative Research ◽  
Information Quality ◽  
Stock Exchange ◽  
Investment Decisions ◽  
Positive Influence ◽  
Individual Investors ◽  
Quality Systems ◽  
Stock Selection ◽  
Stock Investment ◽  
Significant Positive Influence

The aim of the current study was to examine and to obtain empirical evidence of the behavior of individual investors in the stock investment decisions. It was quantitative research which applied sampling purposive technique for gaining data. The population of this study was individual investors in Jayapura who were actively investing in the Indonesia Stock Exchange. The results have shown that (1) Information quality systems have got significant positive influence towards the intensity of stock selection; (2) Return influences the intensity of stock selection; and (3) Education has no influence towards the intensity of stock selection.

Naive portfolios, Brazilian stock funds, and individual investors

2017 ◽  
Vol 30 (3) ◽  
pp. 383-401
Author(s):  
Alexandre Carneiro ◽  
Ricardo Leal
Keyword(s):  
Transaction Costs ◽  
Emerging Market ◽  
Individual Investors ◽  
Stock Selection ◽  
Content Type ◽  
Emerging Stock Markets ◽  
Time Period ◽  
Out Of Sample ◽  
Additional Value ◽  
Practical Implications

Purpose The purpose of this paper is to contrast three investment choices within the reach of individual investors: naive portfolios of Brazilian stocks; actively managed stock funds; and the Ibovespa index, which represents passive management as well as to offer insights on the performance of professional asset managers in this large emerging market. Design/methodology/approach Equally weighted portfolios contained between 5 and 30 stocks to keep transaction costs low. Stock selection used the Ibovespa constituents and considered value (dividend yield (DY) and price-to-book ratio), momentum (past returns), and liquidity, as well as the Sharpe ratio (SR) over the 2003-2012 period, rebalancing three times a year. Findings Cumulative returns of naive portfolios are large. They frequently outperform the index for all values of n. They also outperform stock funds, particularly when the invested amount exceeds US$25,000, due to transaction costs. Yet, expected out-of-sample SRs corrected for errors in estimates are very low, suggesting that one should not count on this historical performance in the future. Naive portfolios may simply be more exposed to additional value, size, and momentum risks. Results are sensitive to time period selection. Practical implications Naive portfolios may be attractive to individual investors in Brazil relative to stock funds, which seem to strive to keep volatility low and may be better when the investment amount is low. There may be merit for value or momentum stock selection strategies when forming small equally weighted portfolios. Originality/value The paper contrasts realistic stock investing alternatives for individuals, it provides a view of stock fund performance in Brazil, and offers practical implications that may be pertinent in other emerging stock markets.

Simple Multivariate Conditional Covariance Dynamics Using Hyperbolically Weighted Moving Averages

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Hiroyuki Kawakatsu
Keyword(s):  
Moving Average ◽  
Curse Of Dimensionality ◽  
Moving Averages ◽  
Conditional Covariance ◽  
Arch Models ◽  
Empirical Application ◽  
Proposed Model ◽  
Out Of Sample ◽  
Weight Model ◽  
Weighted Moving Average

AbstractThis paper considers a class of multivariate ARCH models with scalar weights. A new specification with hyperbolic weighted moving average (HWMA) is proposed as an analogue of the EWMA model. Despite the restrictive dynamics of a scalar weight model, the proposed model has a number of advantages that can deal with the curse of dimensionality. The empirical application illustrates that the (pseudo) out-of-sample multistep forecasts can be surprisingly more accurate than those from the DCC model.

A Study on Stock-Selection and Market-Timing Performance: Evidence from Hong Kong Mandatory Provident Funds (MPF)

2008 ◽  
Vol 11 (04) ◽  
pp. 617-649 ◽  
Author(s):  
Patrick Kuok-kun Chu ◽  
Michael McKenzie
Keyword(s):  
Hong Kong ◽  
Economic Condition ◽  
Market Timing ◽  
Stock Selection ◽  
Timing Ability ◽  
Conditional Models ◽  
Equity Funds ◽  
The Individual ◽  
Timing Models ◽  
Comprehensive Study

This paper presents the first comprehensive study of the performance and market timing ability of the equity funds that comprise the Hong Kong Mandatory Provident Funds (MPF) scheme. In general, our results suggest that US equity funds consistently underperform relative to the market, while the other fund groups consistently outperform the market. The stock-selection ability of MPF constituent equity funds in times of changing economic condition is also investigated. The evidence is consistent with previous studies, which suggest that the conditional models decrease the individual fund traditional alpha measure. The market timing models of Treynor–Mazuy and Henriksson–Merton provide evidence of superior market timing ability.

scholarly journals Effectiveness of Selected Investment Strategies in the Opinion of Polish Individual Investors Depending on their Personal Preferences

2020 ◽  
Vol 13 (4) ◽  
pp. 442-451
Author(s):  
Katarzyna Daniluk
Keyword(s):  
Risk Aversion ◽  
Investment Strategy ◽  
Capital Allocation ◽  
Survey Method ◽  
Individual Investors ◽  
Investment Horizon ◽  
Investment Strategies ◽  
Research Material ◽  
Individual Needs ◽  
Level Of Risk

SummarySubject and purpose of work: The work aimed at identifying and characterising the interdependence between Polish investors’ personal preferences in investing and their opinion about the effectiveness of investment strategies. It was examined how the adopted investment horizon, the level of risk aversion and the time spent daily on investing impact the interviewees’ experiences and opinions on the effectiveness of investment strategies.Materials and methods: As the survey method was employed, a questionnaire was sent to randomly selected Polish individual investors. The research material consisted of 652 questionnaire forms.Results: The study showed a relevant dependence between Polish investors’ personal preferences and their opinions on the effectiveness of the particular strategies.Conclusions: The interdependencies revealed in the study may be used by potential investors in the process of matching a strategy to individual needs so as to enhance the effectiveness of the choice. A higher awareness of the problem of matching an investment strategy to personal preferences will lead to improved effectiveness of capital allocation among Polish investors.

scholarly journals Can Individual Investors Capture The Value Premium?

2011 ◽  
Vol 7 (5) ◽  
Author(s):  
Patrick J. Larkin
Keyword(s):  
Individual Investors ◽  
Investment Strategies ◽  
Enterprise Value ◽  
Market Portfolio ◽  
A Value ◽  
Time Period ◽  
Return On Capital ◽  
Reduce Risk ◽  
One Year ◽  
Value Strategy

I test the performance of several simple one and two-factor mechanical GARP and value investment strategies against a value-weighted market portfolio for the period 1998-2006, focusing on the suitability of the strategies for individual investors. All of the GARP and value strategies produce substantially higher average returns than the market portfolio over the 97 rolling one-year holding periods included in the study. The strategies have a higher standard deviation of returns across the 97 start months, but are less likely than the market portfolio to experience negative returns over any three or five-year time period. Overall, the best performing strategies are EBIT to enterprise value and return on capital, EBIT to enterprise value alone, and earnings yield (the inverse of the P/E ratio). Adding a profitability factor to form a GARP strategy from a simple one-factor value strategy does not appear boost performance, though it does reduce risk in the EBIT to enterprise value and return on capital strategy. My results indicate that individual investors who are able to tolerate occasional underperformance should consider using a GARP or value strategy in at least a portion of the portion of their portfolio that is allocated to U.S. equities.    

scholarly journals Irrational Behaviour and Stock Investment Decision. Does Gender Matter?

2021 ◽  
Vol 11 (2) ◽  
pp. 2185-2204
Author(s):  
M. Siraji ◽  
Na zar ◽  
M.S. Ishar Ali
Keyword(s):  
Risk Perception ◽  
Investment Decision ◽  
Primary Data ◽  
Disposition Effect ◽  
Individual Investors ◽  
Financial Advisors ◽  
Stock Investment ◽  
Irrational Behaviour ◽  
The Individual ◽  
The Right

The research aims to examine the influence of irrational behaviour on stock investment decision, specifically, anchoring, disposition effect, home bias, herding, overconfidence and the risk perception. The research further investigates the moderating role of gender between irrational behaviour and stock investment decision. Finally, it reveals which irrational behaviour is most prevalent. A survey collected the primary data from 425 individual investors. The survey evidence shows that, of six irrational behaviours, anchoring, disposition effect, overconfidence and risk perception were influence the investment decision of individual investors, and risk perception comes out to be the significant irrational behaviour on stock investment decision. It further explores that gender has a significant moderation for anchoring, disposition effect, herding, overconfidence, risk perception, and stock investment decision. We recommend that if individuals are aware of the behavioural biases, it will help them for making the right stock investment decisions. The study also relevant for financial advisors, stockbrokers and policymakers as it facilitates them in gaining a better understanding of their clients’ irrational behaviour. The present study gives a unique insight into the individual investors’ profile of gender corresponding to each main irrational behaviour on investment decision under consideration of stock investment.

scholarly journals Machine learning applied in the stock market through the Moving Average Convergence Divergence (MACD) indicator

2020 ◽  
Vol 17 (4) ◽  
pp. 44-60
Author(s):  
Alberto Antonio Agudelo Aguirre ◽  
Ricardo Alfredo Rojas Medina ◽  
Néstor Darío Duque Méndez
Keyword(s):  
Machine Learning ◽  
Genetic Algorithms ◽  
Stock Market ◽  
Moving Average ◽  
Asset Price ◽  
Technical Analysis ◽  
Investment Strategies ◽  
Historical Data Analysis ◽  
Financial Asset Returns ◽  
Technical Indicator

The implementation of tools such as Genetic Algorithms has not been exploited for asset price prediction despite their power, robustness, and potential application in the stock market. This paper aims to fill the gap existing in the literature on the use of Genetic Algorithms for predicting asset pricing of investment strategies into stock markets and investigate its advantages over its peers Buy & Hold and traditional technical analysis. The Genetic Algorithms strategy applied to the MACD was carried out in two different validation periods and sought to optimize the parameters that generate the buy-sell signals. The performance between the machine learning-based approach, technical analysis with the MACD and B&H was compared. The results suggest that it is possible to find optimal values of the technical indicator parameters that result in a higher return on investment through Genetic Algorithms, beating the traditional technical analysis and B&H by around 4%. This study offers a new insight for practitioners, traders, and finance researchers to take advantage of Genetic Algorithms for trading rules application in forecasting financial asset returns under a more efficient and robust methodology based on historical data analysis.

Sign in / Sign up

Export Citation Format

Share Document