A SIMPLE STRATEGY TO INVEST IN THEVIETNAMESE STOCKS FOR A MODESTPROFIT
Main Article Content
Abstract
Any small investor faces the eternal dilemma - Whether to park
his/her hard earned money in the bank fixed deposits which may earn
low interest but has no risk, or invest in the stock market which may
provide a better return but comes with some risk of losing that money.
Further, the small investors may lack resources to afford expensive and
powerful analytical tools to get an edge in the market. So we have asked
a simple question: With the publicly available market information, can
a small investor devise a simple strategy to beat the bank fixed deposit
rates?
This work presents a simple strategy where we observe an individual
stock’s volatility through the ”spread” over each unit of time (defined
as the interval of (min, max) per unit of time). This spread is a ran-
dom variable having its own probability distribution, but we make no
parametric assumption for this probability distribution.
A stock’s inter percentile range length (IPRL) is then suitably and
nonparametrically calculated based on a training sample of a number of
n
units of time preceding an intended transaction at a given unit time
interval. For our study we have used one hour as our unit of time, and
it is assumed that a stock’s behavior in one time unit is independent of
the others. Also, only one transaction is to be done per unit of time for
an individual stock.
We have studied the overall performance of a portfolio of 26 Viet-
namese stocks chosen from the list of Top VN 100 Stocks, and we have
used the hourly data over
N
= 1245 hours spanning over all the 249
business days for the year 2023. For an individual stock, a bandwidth
is created using the IPRL; if the price falls below the lower margin then
stocks are bought, and they are sold if the price crosses the upper thresh-
old. Results of our simulation study show our portfolio profit margin of
9.6% in one year, with an estimated standard error (SE) of 1.84%. This is
better than the one-year fixed deposit interest rates in the reputed Viet-
namese banks which stood approximately at 5% APY (annual percentage
yield) by the end of 2023.
his/her hard earned money in the bank fixed deposits which may earn
low interest but has no risk, or invest in the stock market which may
provide a better return but comes with some risk of losing that money.
Further, the small investors may lack resources to afford expensive and
powerful analytical tools to get an edge in the market. So we have asked
a simple question: With the publicly available market information, can
a small investor devise a simple strategy to beat the bank fixed deposit
rates?
This work presents a simple strategy where we observe an individual
stock’s volatility through the ”spread” over each unit of time (defined
as the interval of (min, max) per unit of time). This spread is a ran-
dom variable having its own probability distribution, but we make no
parametric assumption for this probability distribution.
A stock’s inter percentile range length (IPRL) is then suitably and
nonparametrically calculated based on a training sample of a number of
n
units of time preceding an intended transaction at a given unit time
interval. For our study we have used one hour as our unit of time, and
it is assumed that a stock’s behavior in one time unit is independent of
the others. Also, only one transaction is to be done per unit of time for
an individual stock.
We have studied the overall performance of a portfolio of 26 Viet-
namese stocks chosen from the list of Top VN 100 Stocks, and we have
used the hourly data over
N
= 1245 hours spanning over all the 249
business days for the year 2023. For an individual stock, a bandwidth
is created using the IPRL; if the price falls below the lower margin then
stocks are bought, and they are sold if the price crosses the upper thresh-
old. Results of our simulation study show our portfolio profit margin of
9.6% in one year, with an estimated standard error (SE) of 1.84%. This is
better than the one-year fixed deposit interest rates in the reputed Viet-
namese banks which stood approximately at 5% APY (annual percentage
yield) by the end of 2023.
Article Details
Section
Articles