PERFORMANCE OF STOP-LOSS RULES VS. BUY-AND-HOLD STRATEGY
(2009)Department of Business Administration
- Abstract
- The purpose of this study is to investigate the performance of traditional stop-loss rules and
trailing stop-loss rules compared to the classic buy-and-hold strategy. The evaluation criteria of
whether stop-loss strategies can deliver better results are defined as return and volatility. The
study is conducted on daily equity returns data for stocks listed on the OMX Stockholm 30
Index during the time period between January 1998 and April 2009 divided into holding periods
of three months. We use the Efficient Market Hypothesis as the rule of thumb and choose an
arbitrary starting date for the holding periods. We test the performance of two types of stop-loss
strategies, trailing stop-loss and traditional stop-loss. Despite the... (More) - The purpose of this study is to investigate the performance of traditional stop-loss rules and
trailing stop-loss rules compared to the classic buy-and-hold strategy. The evaluation criteria of
whether stop-loss strategies can deliver better results are defined as return and volatility. The
study is conducted on daily equity returns data for stocks listed on the OMX Stockholm 30
Index during the time period between January 1998 and April 2009 divided into holding periods
of three months. We use the Efficient Market Hypothesis as the rule of thumb and choose an
arbitrary starting date for the holding periods. We test the performance of two types of stop-loss
strategies, trailing stop-loss and traditional stop-loss. Despite the methodological differences our
results are in line with previous research done by Kaminski and Lo (2007), where they find that
stop-loss strategies have a positive marginal impact on both expected returns and risk-adjusted
expected returns. In our research we find strong indications of the stop-loss strategies being able
to outperform the buy-and-hold portfolio strategy in both criteria. The empirical results indicate
that the stop-loss strategies can do better than the buy-and-hold even clearer cut when compared
in terms of the risk-adjusted returns. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1474565
- author
- Yusupov, Garib and Snorrason, Bergsveinn
- supervisor
- organization
- year
- 2009
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Stop-loss, Trailing Stop-loss, Buy-and-Hold, Behavioral Finance, Strategy, Management of enterprises, Företagsledning, management
- language
- Swedish
- id
- 1474565
- date added to LUP
- 2009-06-04 00:00:00
- date last changed
- 2012-04-02 17:49:03
@misc{1474565, abstract = {{The purpose of this study is to investigate the performance of traditional stop-loss rules and trailing stop-loss rules compared to the classic buy-and-hold strategy. The evaluation criteria of whether stop-loss strategies can deliver better results are defined as return and volatility. The study is conducted on daily equity returns data for stocks listed on the OMX Stockholm 30 Index during the time period between January 1998 and April 2009 divided into holding periods of three months. We use the Efficient Market Hypothesis as the rule of thumb and choose an arbitrary starting date for the holding periods. We test the performance of two types of stop-loss strategies, trailing stop-loss and traditional stop-loss. Despite the methodological differences our results are in line with previous research done by Kaminski and Lo (2007), where they find that stop-loss strategies have a positive marginal impact on both expected returns and risk-adjusted expected returns. In our research we find strong indications of the stop-loss strategies being able to outperform the buy-and-hold portfolio strategy in both criteria. The empirical results indicate that the stop-loss strategies can do better than the buy-and-hold even clearer cut when compared in terms of the risk-adjusted returns.}}, author = {{Yusupov, Garib and Snorrason, Bergsveinn}}, language = {{swe}}, note = {{Student Paper}}, title = {{PERFORMANCE OF STOP-LOSS RULES VS. BUY-AND-HOLD STRATEGY}}, year = {{2009}}, }