Research on Investment Strategy of Hang Seng ETF Based on Hang Seng Indexs P/E Ratio

Abstract

The Hang Seng Index is commonly used by investors as a reference and benchmark for investing in the Hong Kong stock market. It comprises of approximately 40 stocks, mainly blue-chip companies in Hong Kong. The price-to-earnings ratio of Hang Seng Index is a predictive instrument for future price. By comparing price-to-earnings ratio with its historical data, investor would figure out whether the stock is overvalued or not. In this paper, the investment strategy uses performance over the past five years to decide whether to buy or sell. This research collectes data from 2013 to 2022 and tests the feasibility of the strategy. The result shows that the overall rate of return from 2018 to 2022 is 4.83%. After improvement, the rate of return increases to 5.51%, with less loss. This paper finds that price-to-earnings ratio plays a role in predicting market stock price and helps investors obtain more market information to develop an investment strategy with high returns.