| Summary: | 碩士 === 國立中山大學 === 財務管理學系研究所 === 102 === Under the price limit, if the price accelerates toward the limits as it gets closer to the limits, this situation is called magnet effect. Taiwan Stock Market is a good targeting market to discuss the magnet effect because of its narrower price limit. Besides, there are several papers support magnet effect does exist in Taiwan’s market. Hence, we are going to establish a day-trading strategy based on the concept of magnet effect, and are trying to find out the entrance threshold for each stock by an objective method. The entrance threshold signals a higher probability of hitting price limit in the following day-trading period. Thus, investors can buy the stock once the price achieve the entrance threshold and make profits from arbitrage.
First of all, because magnet effect is the foundation of our strategy, we have to examine whether there’s magnet effect in the sample period. Using on the intraday data from 2010/1/4 to 2010/6/30 provided by the TWSE, a significant magnet effect has been found in Taiwan Stock Market during this period. Because each stock should have its own entrance threshold according to its characteristics, we use the Threshold Regression Model brought up by Hansen in 1999, and define the distance from price limit as the threshold variable to find out the entrance thresholds.
Finally, we use the data between 2010/7 to 2010/8 to test the strategy performance with these thresholds, and adopt regression analysis to investigate the factors that influence returns significantly. We found that stocks with higher MB ratio, lower price, higher volatility, stronger buying-pressure, or higher liquidity, may be able to gain profits by using this strategy. Moreover, investors can not only earn profits, but also increase the winning-rate significantly by investing in the following stocks: growing stocks with high liquidity, stocks with low price and high volatility, and stocks with strong buying-pressure and high liquidity. In addition, from the industry’s point of view, the department store industry and the food industry have the highest two winning-rate via this strategy.
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