Browsing by Author "Hsieh, Heng-Hsing"

Now showing 1 - 6 of 6
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    Nonlinearities in stock return prediction: A Blended Approach
    (The Clute Institute, 2013) Hodnett, Kathleen; Hsieh, Heng-Hsing; Van Rensberg, Paul
    Our prior research indicates that there are periods within which nonlinear stock selection models outperform their linear counterparts in the South African equity market. In order to explore the nonlinearities in stock return prediction, we propose a blended stock selection technique that has the potential of diversifying the risk of inaccurate forecasts of the linear and nonlinear models. The proposed technique has an objective of optimizing the Qian and Hua (2003) information ratio, which constitutes to the maximization of the forecasting accuracy per unit of forecasting volatility. The blended stock selection model is found to outperform the respective linear and nonlinear models in an out-of-sample fractile analysis on a risk-adjusted basis for South African stocks over the period from 2002 to 2007.
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    Performance evaluation of actively managed mutual funds
    (LLC CPC Business Perspectives, 2016) malefo, Boikanyo Kenneth; Hsieh, Heng-Hsing; Hodnett, Kathleen
    Motivated by the growing attraction of the mutual fund industry worldwide, this research seeks to explore the economic benefits contributed by the South African equity unit trust managers over the period from 6 January 2002 to 2 September 2012. The performance statistics of selected equity unit trusts are examined for the overall examination period and two sub-periods: 6 January 2002 to 6 May 2007 and 7 May 2007 to 2 September 2012. The first sub-period captures the bullish performance of the unit trusts before the 2008 global financial crisis. The second sub-period captures the global financial crisis and the European debt crisis before the European Central Bank (ECB) subsequently implemented the outright monetary transactions (OMT) to curb the yields in Eurozone. The risk-adjusted performance measures employed by this study include the Sharpe ratio, M-squared, Treynor measure and Jensen's alpha. Regardless of the different applications of risk-return parameters employed to evaluate fund performance, the results reveal that, on average, most of the equity unit trust managers in South Africa do not outperform the market proxy on a consistent basis. The majority of the unit trust managers show good performance before the crisis, with subsequent inferiority in performance in turbulent times.
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    Potential gains from predicting the timing of stock market persistence and mean reversion
    (Business Perspectives, 2013) Hsieh, Heng-Hsing
    This paper undertakes to investigate the effectiveness of market timing between prior winners and losers in the global equity markets using Monte Carlo simulation over the period from 1 January 1999 to 31 December 2009. The winner and loser portfolios of 100 stocks are constructed based on the prior 36-month U.S. dollar returns of the Dow Jones (DJ) Sector Titans Composite constituents. The market timer is assumed to have varying accuracy in predicting market persistence and mean reversion, and switch between the winner and loser portfolios on a quarterly basis based on his/her predictions. Sensitivity analysis is conducted to determine whether it is more important to predict the timing of persistence versus mean reversion. The study results reveal that an effective market timing strategy could be devised for market timers with modest ability to predict the timing between global equity market persistence and mean reversion. Greater benefits are derived from improvements in the mean reversion timing accuracy versus persistence timing accuracy, even though only 19 out of 44 quarters are classified as periods of mean reversion in the examination period. The results from sensitivity analysis support the view that it is more important to predict the timing of mean reversion correctly than persistence. This outcome could be attributed to the resilient nature of the loser portfolio in turbulent times. The observation that the majority of the persistent quarters are bullish (65.52%) while the majority of the mean reversion quarters are bearish (60%) provides evidence of investor overreaction in the global equity markets.
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    Potential gains from sector timing in Taiwan
    (IFRD, 2013) Hsieh, Heng-Hsing
    The dominance of the electronic sector in the Taiwanese stock market and the relatively low historical correlation between the Taiwanese electronic and financial sector indexes call for the exploration of sector diversity in the Taiwanese stock market. This study investigates the effectiveness of sector timing in Taiwan by evaluating the likely outcomes from switching between the electronic and the financial indexes for data spanning the period December 1999 through December 2012. The proposed sector timing strategy could be implemented using Taiwanese sector index futures. The market timer is assumed to have different timing abilities in the electronic-dominant market and the financial-dominant market. The main results of the research include that when transaction costs are taken into consideration, significant sector timing ability is required to beat the sector benchmark; and it is more important to improve the ability in timing the financial-dominant market in Taiwan.
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    A review of performance evaluation measures for actively-managed portfolios
    (IFRD, 2013) Hsieh, Heng-Hsing
    In the recognition that investment management is an on-going process, the performance of actively-managed portfolios need to be monitored and evaluated to ensure that funds under management are efficiently invested in order to satisfy the mandate specified in the policy statement. This paper discusses the primary performance evaluation techniques used to measure a portfolio's basic risk and return characteristics, risk-adjusted performance, performance attribution and market timing ability. It is concluded that the Treynor measure is more suitable for evaluating portfolios that are constituents of a broader portfolio, while the information ratio is useful for evaluating hedge funds with an absolute return objective. Although the Sharpe ratio and M-squared arrive at the same evaluation result, M-squared provides a direct comparison between the portfolio and the benchmark. With regard to the analysis of portfolio performance attribution, it is found that the return-based multifactor model of Sharpe (1992) is not suitable for analyzing the performance of hedge funds that engage in short-selling, leverage and derivatives. Additional factors generated by factor analysis could be used as factors in the extended model of Sharpe (1992) to analyze hedge fund return attributions. Finally, the Treynor and Mazuy (1966) model and the Henriksson and Merton (1981) model essentially distinguish the market timing ability from the security selection ability of the portfolio manager.
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    Unlocking the secrets of fundamental indexes: size effect or value effect? Evidence from emerging stock markets
    (Business Perspectives, 2013) Hsieh, Heng-Hsing
    Despite the abundant successful evidence of fundamental indexation in recent international literature, it is argued that the performance of fundamental indexes is primarily attributed to their inherent value bias or avoidance of large caps. To clarify whether the merits of fundamental indexation represent reward to priced value and size risk factors, performance attribution analysis is conducted on the fundamental indexes in emerging stock markets based on the Fama and French (1993) 3-factor model. The results of this study indicate that with the exception of the sales indexes, the majority of the fundamental-weighted indexes have significant exposures to the size and value risks in emerging stock markets, and earn significantly negative abnormal returns after the size and value risks are controlled for. It is also found that although fundamental-weighted indexes accumulate positive residuals during the crash of the dot.com bubble in 2000 and the global financial crisis in 2008, they also experience severe drawdown during these periods. This observation suggests that fundamental indexation might have significant exposures to known risk factors in emerging markets during turbulent times.