Volume Based Portfolio Strategies: Analysis of the Relationship Between Trading Activity and Expected Returns in the Cross-Section of Swiss Stock

ISBN-13: 9783834921062 / Angielski / Miękka / 2010 / 320 str.

Alexander Brändle

Opis

1 Introduction In this introductory chapter, we first introduce the topic of this project and its relevance to research and practice. After the statement of the main objectives, we formulate its research questions and contributions. Following some important definitions, we c- clude this introduction by outlining the structure of this project report. 1. 1 Motivation For a long time, the predominant view in finance was that the variation of returns across stocks could be explained by their sensitivities (i. e., betas) to a single factor, the excess return of the market portfolio. This classical view, reflected in the Capital Asset Pricing Model (CAPM), implies that no portfolio strategy selecting stocks on the basis of other factors is able to consistently outperform a passive 'buy and hold' strategy (reflecting the market capitalization-weighted investment universe). Later research, however, found that other factors also play an important role in the cross-sectional variation of stock returns. Especially observed stock attributes such as past returns, market capitalization, or book-to-market ratio, were found to have a high explanatory power. Subsequent - search even proved the existence of profitable portfolio strategies formed on the basis of such stock attributes, which led to their practical implementation and offering by prof- sional investment firms. These quantitative strategies have since become increasingly popular, especially as a means to diversify investments (which is particularly helpful in case of a low correlation between a strategy's return and the development of the m- ket).

Spis treści

Systematization of trading volume literature; Regression analysis and portfolio strategies; Time-stability and economic significance of portfolio returns; Multiple facets of trading volume investigated; Includes the 2008 downturn

O autorze

Dr. Alexander Brändle wrote his dissertation under the supervision of Prof. Dr. Pascal Gantenbein at the Swiss Institute of Banking and Finance, University of St. Gallen (Switzerland). He works as a management consultant, focusing mainly on financial services firms.

Blurb

Alexander Brändle investigates the relationship between different measures of trading volume and returns in the Swiss stock market. He discovers that stocks with unusual trading volume in a given month experience systematically higher subsequent returns. This abnormal volume effect is particularly strong in uncertain market situations including the 2008 downturn.