Terms Of Total Return Research Articles

“Taps”: A trading approach based on deterministic sign patterns

We propose a new methodology for trading financial instruments based on deterministic sign patterns. These patterns are obtained from the m-dimensional elementary sample space consisting of -1,1m, the two possible signs for trading and with m varying. The collection of all possible sign combinations coming from this sample space creates a zero-cost trading strategy and we consider strategies that are selected from rotations among the possible sign sequences using several statistical criteria. Performing simulations, based on a geometric Brownian motion, we find that – on average – our strategies can outperform the buy & hold benchmark about 30% of the time in terms of total return and around 60% of the time in terms of maximum drawdown. We then illustrate the practical efficacy of the proposed strategies using daily returns from the S&P500 index, two of the largest Chinese stock market indices, the CSI300 and the SSE50, and three exchange traded funds (ETFs). Our results strongly suggest performance improvements over the corresponding buy & hold benchmarks and, furthermore, that these performance differences can be attributed to the entropy of the US and Chinese markets: we find that the two Chinese indices, which have larger entropy than the US index, provide considerable performance enhancements when traded based on our suggested methodology.

The performance of UK regeneration property within a mixed asset portfolio

Urban regeneration has been an integral focus of central government policy in the UK for more than three decades and has played a pivotal role in enhancing the competitiveness of the UK economy, repositioning cities and city regions as the mainstays of economic growth. Utilising IPD data, this study confirms the capacity of regeneration property to match or outperform the wider real estate market in terms of total return over the medium‐long term. Significantly, optimal portfolio analysis demonstrates that urban regeneration property replaces mainstream real estate within a multi‐asset portfolio based on the total returns performance of equities, bonds, mainstream property and regeneration property over the 28‐year time series 1981–2008.

Characteristics of permanent and transitory returns in oil-sensitive emerging stock markets: The case of GCC countries

The estimates suggest that for both return components there exists a statistically significant high volatility regime for all the Gulf Cooperation Council (GCC) stock markets and the oil market. On the other hand, the results for the low volatility state of both components are mixed. The individual GCC markets vary in terms of sensitivity to volatility and its duration; with Saudi Arabia and Oman having the highest overall return volatility. All the GCC markets are much less volatile than that of the more open, crisis-ridden, oil-exporting Mexico. All GCC returns move in the same direction, whether in terms of total return, fundamentals or fads under both volatility regimes. The correlations between themselves and with Mexico, the oil price and the Morgan Stanley Capital International Index (MSCI) returns are weak compared to the correlations among stock returns of Germany, Japan UK and the US [Bhar, R., Hamori, S., 2004. Empirical characteristics of the permanent and transitory components of stock returns: analysis in a Markov-switching heteroscedasticity framework. Economics Letters 82, 157–165]. Mexico has considerably higher correlation with both MSCI and the oil price than all the GCC countries.

Hotel Real Estate in a Property Investment Portfolio – Analysis of Results From 1992 to 2001

ABSTRACT This paper analyses the performance of five real estate sub-sectors (office, retail, industrial, apartment, and hotel) over a ten-year (historical) period, 1992 to 2001, in order to assess the impact the hotel sub-sector would have when constructing a multi-property investment portfolio. The research was built on the foundation of modern portfolio theory and data were analyzed using correlation analysis, Sharpe Ratio, and a portfolio simulation model. Research results suggest that at least during the period 1992 to 2001, the hotel sub-sector outperformed all other sub sectors in terms of total returns and also produced the second best risk-adjusted returns. The results also suggest that the inclusion of hotels in the real estate investment portfolio had a significant impact on the efficient frontier offering several “higher risk – higher return” target options for an investor. As such the significance of the hotel sub-sector within a multi-property real estate investment portfolio is better under...

Hotel Real Estate in a Property Investment Portfolio: An Examination of Results from 1992 to 2001

ABSTRACT This paper analyzes the performance of five real estate sub-sectors (office, retail, industrial, apartment, and hotel) over a 10-year (historical) period, 1992 to 2001, to assess the impact the hotel sub-sector would have on investment performance when constructing a multi-property investment portfolio. The research was built on the foundation of modern portfolio theory, and data were analyzed using correlation analysis, Sharpe ratio, and a portfolio simulation model. Research results suggest that, at least during the study period, the hotel sub-sector outperformed all other sub-sectors in terms of total returns and produced the second best risk-adjusted returns. The results also suggest that the inclusion of hotels in the real estate investment portfolio had a significant impact on the efficient frontier, offering several “higher risk–higher return” target options for an investor. As such, the significance of the hotel sub-sector within a multi-property real estate investment portfolio is better...

Does Historical Performance Predict Future Performance?

An investigation of the persistence of mutual fund performance indicates that investors need more than past performance numbers to pick future winners. In this study, style analysis was used to separate fund total returns into style and selection components. Performance was defined in terms of total returns, selection returns, and information ratios (ratios of selection return to selection risk). For each fund type, two out-of-sample periods were established to investigate persistence of performance from one period to the next using regression analysis and contingency tables. The evidence supported persistence only for fixed-income fund performance. This persistence is beyond any effects of fund fees and expenses or data base survivorship bias. Unfortunately, this persistence edge cannot overcome the average underperformance of fixed-income funds resulting from fees and expenses.