Can investment strategies beat the market

Abstract

Over the past three decades, many anomalies, known as investment strategies, have been documented on the global financial markets. However, from 2000s to now, several scholars have shown considerable changes in the magnitude of these excess returns. Therefore, the purpose of this thesis is to examine whether these investment strategies can be applied in Vietnam stock market or not. In addition, this thesis also provides the explanation of difference in returns. By processing the data set containing of 689 listed firms in Ho Chi Minh Stock Exchange (HOSE) and Ha Noi Stock Exchange (HNX) during the period 2006 to 2014, this thesis examines three investment strategies including value investing, momentum investing and size investing. The evidences in Vietnam stock market confirms the existences of statistically value premium and size premium during the normal economic condition. During the financial crisis period, the results also confirm the value and size premium but they are not significant in the statistical point of view. In term of momentum investment strategy, it cannot be applied in reality when the results shown that the existences of momentum premium are not clear during the normal economic condition and financial crisis period. Traditional risk based measures are also examined to find the explanation of anomalies. The results indicated that volatility can be used to explain the excess return but in term of beta, it cannot be used. The behavioral arguments are not covered in this thesis, so that an implication for future research refers towards the under and over-reaction in the value investment strategy, the size investment strategy, and the momentum investment strategy.