Shall we buy and hold? Evidence from Asian real estate markets

Abstract

Purpose -The purpose of this study is to verify whether the trading strategy can beat the "buy-and-hold" strategy for the securitized real estate indices of six Asian economies: Hong Kong, China, Japan, Taiwan, Thailand and Malaysia. Design/methodology/approach -This paper constructs a trading strategy from the Shiryaev-Zhou index and tests the strategy on the securitized real estate indices of six emerging Asian economies: Hong Kong, China, Japan, Taiwan, Thailand and Malaysia. The authors compare the resulting profits from using the trading strategy with the resulting profits from using the "buy-and-hold" strategy. The authors consider three cases: no transaction costs, 0.1 percent transaction costs, and 0.2 percent transaction costs. Findings -The results show that the trading strategy the authors constructed generally outperforms the "buy-and-hold" strategy even in the presence of transaction costs. In particular, the authors have a new finding as follows: Thailand and Malaysia's securitized real estate indices fell drastically during the period of observation. However, applying the trading strategy to these two securitized real estate indices can still earn a profit. Practical implications -The trading strategy is particularly useful in protecting investors from huge loss in adverse market conditions. The results can be applied to the field of finance/investment that investors can construct a trading strategy similar to the authors to earn more profits. Originality/value -This study will consider cases where both buying and selling costs exist, so the scenario is more like stock transactions in real-life equity markets. Furthermore, in this paper, for each securitized real estate index, the authors plot a graph to show the holding and non-holding periods under the trading strategy. This would help the authors explain the resulting profit under the trading strategy. This kind of graphical analysis was neglected by Hui and Yam.

A New Time-Dependent Trading Strategy for Securitized Real Estate and Equity Indices

“…This reflects that our strategy is particularly effective on adverse-performing stocks or stock indices, similar to Hui and Chan (2014a)'s result that their strategies outperformed "buy-and-hold" the most for the stock New World, which fell significantly during the period. What we add to Hui and Chan (2014) is that for those adverse-performing stocks or stock indices, the optimal moving-window sizes for our strategy tend to be larger.…”

Análise Comparativa de Estratégias de Investimentos em Ações de Companhias Brasileiras

“…Segundo Hui e Chan (2014), a B-H baseia-se na Hipótese de Eficiência de Mercado (HEM), teoria que preconiza que os preços refletem a qualquer momento o fluxo de informações disponíveis no mercado, não sendo possível, estabelecer e implantar estratégias que garantam Análise comparativa de estratégias de investimentos em ações de companhias brasileiras de maneira sistemática ganhos acima do mercado baseando-se somente nos dados passados de um ativo financeiro (Fama, 1970). Não há, entretanto, consenso entre acadêmicos e investidores sobre a observação da HEM em diferentes ambientes Hui, Yam, Wright & Chan et al, 2014;Shiryaev, Xu & Zhou, 2008), visto que há questionamentos sobre a forma de difusão das informações nos mercados e a sua incorporação nos preços. Desse modo, pode-se argumentar sobre a possibilidade de construir táticas alternativas de investimento que proporcionem aos investidores lucros superiores aos aferidos pela simples compra e manutenção dos ativos por determinado tempo como preconizado pela B-H.…”

Optimal Trading Strategy During Bull and Bear Markets for Hong Kong-Listed Stocks

“…Hui and Yam (2014) apply the Shiryaev-Zhou index to derive a trading strategy which outperforms the "buy-and-hold" strategy in general. The same strategy is applied by Hui, Yam, Wright, and Chan (2014b) and Hui & Chan (2014) (with minor modifications). All of these three studies use the same moving-window size 130 for their strategies.…”

“…However, stock prices fluctuate frequently in reality. On a particular day, if the estimator of the Shiryaev-Zhou index is negative (in this case, one has to hold entire cash according to the strategy of Hui and Yam (2014), Hui, Yam, Wright, & Chan (2014b) and Hui & Chan (2014)), but the stock price rises, then the strategy would underperform "buy-and-hold" on that day. The optimal moving-window size may not necessarily be 130.…”