Winner Strategies in Crisis

Abstract

Research background: Since the publication of Markowitz’ Portfolio Selection Theory, researchers and practitioners have been searching for the optimal structure of investment portfolios. An unlimited number of portfolio-based investment strategies have been created since 1952. However, none of these strategies seem to continuously generate overperformance over a long time period. This may also be due to the strong dynamics of economic development and other external factors. Purpose of the article: The aim of this article is to analyze which strategies are successful in generating winning portfolios in times of crisis. Three types of crises are considered: first, the bursting of the dot-com bubble in 2001, second, the financial crisis of 2008, and finally, the performance impact of the corona crisis. Methods: The data of the S&P 500 and STOXX Europe 600 companies are analyzed. The first step is the statistical review of the performance of companies in different periods with the focus on the analysis of the crisis years. Subsequently, the formation of portfolios is carried out according to known key figures such as high-low PE ratio, high-low market-to-book ratio, and others. In the form of a regression analysis, selected fundamental data are used to statistically check their relevance for performance. Findings & Value added: The results shows that all crises have similarities in certain factors. However, they also show that companies with a digital business model are able to manage crises better than those without a digital business model.

The dynamics of the prices of the companies of the STOXX Europe 600 Index through the logit model and neural network

“…In addition to this, Salvi et al [19] studied the relationship between the volume of LBOs and the STOXX Europe 600 Index and De Blasis and Petroni [8] considered the Index in question to analyse the relationship between oil and renewable energy firms with regard to the COVID-19 pandemic. In addition to this, Langenstein et al [12] took into consideration the companies of the STOXX Europe 600 Index together with the companies of the S&P500 Index to explore the best strategies that can be enhanced during crisis, Chen et al [6] analysed the dynamics of the FTSE 100, S&P500 Index and STOXX Europe 50 by taking into account different exchange rates and Bonsón and Bednárová [3] considered some of the companies of the STOXX Europe 600 Index to carry out their research regarding the CSR reporting practices of the companies of the Eurozone. To the authors' knowledge, there are no researches focusing on whether the inclusion or the exclusion of a company from the STOXX Europe 600 Index has an impact on the fluctuations of the prices of the company in question; for this reason, the objective of this work is understanding the dynamics of the prices of companies depending on whether the company considered is a constituent or is not part of the STOXX Europe 600 Index.…”