IDEAS home Printed from https://ideas.repec.org/p/nan/wpaper/1502.html
   My bibliography  Save this paper

Strategy Change and Wealth Accumulation: An Analysis of S&P 500 Data

Author

Listed:
  • Weihong HUANG

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332)

  • Yu ZHANG

    (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332)

Abstract

This paper studies investors' strategy change frequency and their wealth accumulation by financial investments. Artificial investors are put into a real stock market. They trade S&P 500 following common strategies in practice. Fundamental analysis generally surpasses technical analysis in all market situa- tions except boom periods. Though investors' strategy change behavior, which is driven by the past performance of strategies, seems reasonable, a faster strat- egy change does not guarantee a higher final wealth. Active strategy change hurts investor' wealth in bear markets and in markets with major trend rever- sals. In bull markets, both fast and slow strategy change behaviors work better than a moderate speed of strategy change. A detailed decomposition of wealth accumulation via financial investment shows the dependence of wealth on in- vestors' past transactions. This may explain the relation between investors' strategy change frequency and their wealth.

Suggested Citation

  • Weihong HUANG & Yu ZHANG, 2015. "Strategy Change and Wealth Accumulation: An Analysis of S&P 500 Data," Economic Growth Centre Working Paper Series 1502, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:1502
    as

    Download full text from publisher

    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2015/2015-02.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Day, Richard H. & Huang, Weihong, 1990. "Bulls, bears and market sheep," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 299-329, December.
    2. Chiarella, Carl & He, Xue-Zhong & Hommes, Cars, 2006. "A dynamic analysis of moving average rules," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1729-1753.
    3. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
    4. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186 Elsevier.
    5. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
    6. Lux, Thomas, 1995. "Herd Behaviour, Bubbles and Crashes," Economic Journal, Royal Economic Society, vol. 105(431), pages 881-896, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Financial Investment Strategy; Strategy Change Frequency; Wealth Accumulation; Standard & Poor's 500;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G19 - Financial Economics - - General Financial Markets - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nan:wpaper:1502. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Magdalene Lim). General contact details of provider: http://edirc.repec.org/data/dentusg.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.