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Strategy Change and Wealth Accumulation: An Analysis of S&P 500 Data

Weihong Huang and Yu Zhang ()
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Weihong Huang: Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332

No 1502, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: This paper studies investors' strategy change frequency and their wealth accumulation by financial investments. Artificial investors are put into a real stock market. They trade S&P 500 following common strategies in practice. Fundamental analysis generally surpasses technical analysis in all market situa- tions except boom periods. Though investors' strategy change behavior, which is driven by the past performance of strategies, seems reasonable, a faster strat- egy change does not guarantee a higher final wealth. Active strategy change hurts investor' wealth in bear markets and in markets with major trend rever- sals. In bull markets, both fast and slow strategy change behaviors work better than a moderate speed of strategy change. A detailed decomposition of wealth accumulation via financial investment shows the dependence of wealth on in- vestors' past transactions. This may explain the relation between investors' strategy change frequency and their wealth.

Keywords: Financial Investment Strategy; Strategy Change Frequency; Wealth Accumulation; Standard & Poor's 500 (search for similar items in EconPapers)
JEL-codes: C63 G19 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2015-07
New Economics Papers: this item is included in nep-fmk and nep-sea
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