Integration of stock selection model and market timing model

• Main Authors: Kai-Hung Huang, 黃凱鴻
• Other Authors: I-Cheng Yeh
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/02979054728323657113

碩士 === 中華大學 === 資訊管理學系碩士班 === 99 === This paper aims to study three questions (1) whether there is interaction between stock selection and timing, (2) to explore the performance of "timing and stock selection composite model" in Taiwan stock market, and (3) to explore the performance of the combination of three investing models (stock selection model, market timing model, and composite model) and three trading strategies (long only, short only, long-short trading strategy) in Taiwan stock market. The test samples consist of all the listed stocks in Taiwan stock market. The backtest period is from January 1997 to September 2009, a total of 12.75 years. The results showed that (1) the excess returns in bear market are very different from those in bull market. The gaps between the excess return of long portfolio and short portfolio formed by return on equity (ROE) are very large in bear market, but small in bull market. On the contrary, those formed by price to book value ratio (PBR) are small in bear market, but large in bull market. These showed that in the bear market the companies’ profit or loss has a strong impact on their stock returns; however, in bull market, the value of stocks has a strong impact on their stock returns. (2) In the nine composite models, the long timing – long stock selection composite model has the highest return; the short timing – short stock selection composite model has the lowest return. The performance of the three timing model follows the following rules: long timing > no timing> short timing; the performance of the three stock selection model follows the following rules: long stock selection > no stock selection > short stock selection. The returns of composite model can be superimposed with stock selection model and market timing model. (3) The short trading strategy is generally worse than the long trading strategy, which may be because through a rather long term, the stock market's return is positive. Accumulated capital of stock selection model is fluctuated with the market. On long trading strategy, it is fluctuated in the same direction; on short trading strategy, fluctuated in the reverse direction. The market timing model can avoid the downward trend period, so its accumulated capital is not fluctuated with the market in bear market. The returns of long-short trading strategy can be superimposed with long trading strategy and short trading strategy.