Research on Choices of Investment Strategies

DOI

10.2991/assehr.k.200316.292How to use a DOI?

Keywords

positive strategy, negative strategy, VaR, portfolio management

Abstract

The argument of whether the market is efficient has lasted for a long time and it is essential for an investor to determine what kind of investment strategy to choose facing different market effectiveness. It is valuable to determine which kind of strategy to use in different market stages. We would like to evaluate the performance of passive strategy, so we choose NASDAQ index ETF and HSI ETF as the representatives. The method of regression and tracking error are used and it is easy to get the conclusion that returns of ETFs follows the change of whole market and only a small amount of return could be earned. Then, we should establish a mutual fund to evaluate the performance of aggressive strategy. To eliminate the influence of the extreme value and manipulation, the best choice is to construct a fund of fund using 4 dominant mutual funds and basing on Markowitz’s portfolio theory, we construct a FOF and calculate daily return and evaluate risk with VaR. After comparing the performance of the passive strategy and aggressive strategy, we find that the return of ETF and FOF display an opposite trend. This finding is consistent with behavior finance theory which holds the point of view that the effectiveness of the market changes with economic cycle. In the end, it is easy to get the following conclusions: first, when the market enters the effective stage, passive strategy is economical and ideal; second, when the market is inefficient, aggressive strategy could bring extra return. These conclusions fill the gap between academy and industry and prove the research of behavior finance.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Lin Song
PY  - 2020
DA  - 2020/03/19
TI  - Research on Choices of Investment Strategies
BT  - Proceedings of the 4th International Conference on Culture, Education and Economic Development of Modern Society (ICCESE 2020)
PB  - Atlantis Press
SP  - 1354
EP  - 1360
SN  - 2352-5398
UR  - https://doi.org/10.2991/assehr.k.200316.292
DO  - 10.2991/assehr.k.200316.292
ID  - Song2020
ER  -