Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm
Objective: Contratum strategies are hybrid strategies in which, like the reverse strategy, the portfolio ranking is based on a long-term time horizon. However, the time horizon of their maintenance is like medium-term momentum strategies. Momentarian or momentary strategies are among the combined st...
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| Format: | Article |
| Language: | fas |
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University of Tehran
2022-12-01
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| Series: | تحقیقات مالی |
| Subjects: | |
| Online Access: | https://jfr.ut.ac.ir/article_90703_208f02dacdc065a40ebb268c029ee00a.pdf |
| _version_ | 1797903265726201856 |
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| author | Ali Teymouri Ashtiani Mohsen Hamidian Seyedeh Mahboubeh Jafari |
| author_facet | Ali Teymouri Ashtiani Mohsen Hamidian Seyedeh Mahboubeh Jafari |
| author_sort | Ali Teymouri Ashtiani |
| collection | DOAJ |
| description | Objective: Contratum strategies are hybrid strategies in which, like the reverse strategy, the portfolio ranking is based on a long-term time horizon. However, the time horizon of their maintenance is like medium-term momentum strategies. Momentarian or momentary strategies are among the combined strategies whose portfolio ranking and stock selection are based on the medium-term time horizon, just like the momentum strategy; however, unlike reverse strategy, they are kept in long term. In this research, an attempt has been made to provide an optimal model for stock selection based on momentum, reverse, and hybrid trading strategies using the GWO algorithm and dynamic panel.
Methods: Considering the fact that the purpose of the current research is to answer the questions and test the existing theories in a specific field, it can be categorized as applied research (research and development), and due to its possibility of obtaining a descriptive explanation of a phenomenon, it can be considered as the pseudotype, experiential, descriptive and post-event. In addition, due to description, inference, and problem-solving using quantitative values, it is in the scope of quantitative research. To estimate the model, the information of 175 companies in the period from 2012 to 2021 was used, as well as the software E-Views 12 and MATLAB 2021. Based on the results of 8 time periods of 3, 6, 9, 12, 24, 36, 48, and 60 months, it was analyzed according to different momentum and reverse and combined strategies in loser, winner, and loser-winner, winner-loser positions. It should be noted that two methods of the dynamic panel and gray wolves were used to estimate the strategies.
Results: The existence of a momentum strategy was confirmed in the Tehran Stock Exchange, which ensures the hypothesis of underreaction in Iran's capital market. Investors in this market show less reaction to the change of the fundamentals affecting the stock price. Accordingly, the correction of the stock price of these companies is done slowly until it reaches its intrinsic value. Of course, factors such as the volatility limit, the base volume, and the trading node law also fuel this slowness and cause the price correction process to take place with a delay by the formation of buying and selling queues. This helps to use the momentum strategy and obtain abnormal returns in this market. As a result, it can be said that the momentum policy and, naturally, based on the research results, combined approaches cannot create abnormal profits for their investors in the capital market of Iran.
Conclusion: Financial market activists and investors are advised to use mixed strategies to improve their buying and selling decisions. Due to the improvement of the results of the gray wolf method compared to the simple panel method, they should use artificial intelligence methods instead of regression methods in the calculations and formation of the optimal portfolio. |
| first_indexed | 2024-04-10T09:30:12Z |
| format | Article |
| id | doaj.art-b8827365b3a14280ae62d8deb053f727 |
| institution | Directory Open Access Journal |
| issn | 1024-8153 2423-5377 |
| language | fas |
| last_indexed | 2024-04-10T09:30:12Z |
| publishDate | 2022-12-01 |
| publisher | University of Tehran |
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| series | تحقیقات مالی |
| spelling | doaj.art-b8827365b3a14280ae62d8deb053f7272023-02-19T06:43:36ZfasUniversity of Tehranتحقیقات مالی1024-81532423-53772022-12-0124462465410.22059/frj.2022.337123.100730890703Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO AlgorithmAli Teymouri Ashtiani0Mohsen Hamidian1Seyedeh Mahboubeh Jafari2Ph.D. Candidate., Department of Finance, Faculty of Economics and Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran.Associate Prof., Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran.Assistant Prof., Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran.Objective: Contratum strategies are hybrid strategies in which, like the reverse strategy, the portfolio ranking is based on a long-term time horizon. However, the time horizon of their maintenance is like medium-term momentum strategies. Momentarian or momentary strategies are among the combined strategies whose portfolio ranking and stock selection are based on the medium-term time horizon, just like the momentum strategy; however, unlike reverse strategy, they are kept in long term. In this research, an attempt has been made to provide an optimal model for stock selection based on momentum, reverse, and hybrid trading strategies using the GWO algorithm and dynamic panel. Methods: Considering the fact that the purpose of the current research is to answer the questions and test the existing theories in a specific field, it can be categorized as applied research (research and development), and due to its possibility of obtaining a descriptive explanation of a phenomenon, it can be considered as the pseudotype, experiential, descriptive and post-event. In addition, due to description, inference, and problem-solving using quantitative values, it is in the scope of quantitative research. To estimate the model, the information of 175 companies in the period from 2012 to 2021 was used, as well as the software E-Views 12 and MATLAB 2021. Based on the results of 8 time periods of 3, 6, 9, 12, 24, 36, 48, and 60 months, it was analyzed according to different momentum and reverse and combined strategies in loser, winner, and loser-winner, winner-loser positions. It should be noted that two methods of the dynamic panel and gray wolves were used to estimate the strategies. Results: The existence of a momentum strategy was confirmed in the Tehran Stock Exchange, which ensures the hypothesis of underreaction in Iran's capital market. Investors in this market show less reaction to the change of the fundamentals affecting the stock price. Accordingly, the correction of the stock price of these companies is done slowly until it reaches its intrinsic value. Of course, factors such as the volatility limit, the base volume, and the trading node law also fuel this slowness and cause the price correction process to take place with a delay by the formation of buying and selling queues. This helps to use the momentum strategy and obtain abnormal returns in this market. As a result, it can be said that the momentum policy and, naturally, based on the research results, combined approaches cannot create abnormal profits for their investors in the capital market of Iran. Conclusion: Financial market activists and investors are advised to use mixed strategies to improve their buying and selling decisions. Due to the improvement of the results of the gray wolf method compared to the simple panel method, they should use artificial intelligence methods instead of regression methods in the calculations and formation of the optimal portfolio.https://jfr.ut.ac.ir/article_90703_208f02dacdc065a40ebb268c029ee00a.pdfstock returnmomentumreversalcontratummomentariangray wolfdynamic panel |
| spellingShingle | Ali Teymouri Ashtiani Mohsen Hamidian Seyedeh Mahboubeh Jafari Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm تحقیقات مالی stock return momentum reversal contratum momentarian gray wolf dynamic panel |
| title | Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm |
| title_full | Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm |
| title_fullStr | Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm |
| title_full_unstemmed | Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm |
| title_short | Providing the Optimal Model for Stock Selection Based on Momentum, Reverse and Hybrid Trading Strategies Using GWO Algorithm |
| title_sort | providing the optimal model for stock selection based on momentum reverse and hybrid trading strategies using gwo algorithm |
| topic | stock return momentum reversal contratum momentarian gray wolf dynamic panel |
| url | https://jfr.ut.ac.ir/article_90703_208f02dacdc065a40ebb268c029ee00a.pdf |
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