The Value of Active Investment Strategies

Tarek Zaher

No 2017-WP-02, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: In this study we examine the value of implementing a combination of active investment management strategies in portfolio construction versus a passive strategy. In particular we test whether a portfolio that is built using stock screening programs and ratings of stocks outperforms an investment in the market index. In our stock screening process, we use a set of screening criteria commonly used in academic research and professional investment analysis to construct portfolios of stocks that are capable of outperforming the market. The results of our analysis show that the portfolio returns developed from the screening models signi?cantly exceed the returns on the market. The results also suggest that ef?cient individual investors who can take advantage of the recent development in information technology can outperform the market. The findings also indicate investors tend to invest in more stable large capitalization firms during periods of economic or financial crises. The evidence in this study indicates that in addition to the fundamental indicators that are known to be effective in previous studies, technical indicators and analysts’ ratings are also successful in generating higher excess returns.

Keywords: investment strategy; portfolio management (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2017-08
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