A new time-dependent trading strategy for securitized real estate and equity indices

Chi Man Hui, Ka Kwan Kevin Chan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)

Abstract

The “buy-and-hold” strategy based on the EMH has been adopted by many investors for long. However, the global financial crisis in 2008 caused more doubt to be cast on EMH. Therefore, many scholars have attempted to create a trading strategy which can outperform the “buy-and-hold” strategy. In this study, we use the Shiryaev-Zhou index to derive a new generalized time-dependent strategy of which the moving-window size can be changed to see how the moving-window size affects the resulting profit of our strategy. We test our strategy on the securitized real estate and general equity indices of six economies, and find the optimal moving-window size for our strategy on each stock index. The results show that when the optimal moving-window size is used, our strategy outperforms the “buy-and-hold” strategy for most cases. Furthermore, during stock market downturns, it’s advisable to adopt our strategy, preferably with larger moving-window sizes, to prevent losses when the stock prices fall rapidly. However, during long periods of booms, it’s better to adhere to the “buy-and-hold” strategy. This implies that we should switch strategies when market fundamentals changes significantly. Property practitioners can also apply this strategy for a better portfolio management to increase their profit.

Original languageEnglish
Pages (from-to)64-79
Number of pages16
JournalInternational Journal of Strategic Property Management
Volume22
Issue number1
DOIs
Publication statusPublished - 1 Jan 2018

Keywords

  • Buy-and-hold
  • Moving-window size
  • Securitized real estate index
  • Shiryaev-Zhou index
  • Transaction cost

ASJC Scopus subject areas

  • Strategy and Management

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