Active portfolio management: A case for technical analysis

Tunji Ogunkoya 54 PAGES (12206 WORDS) Dissertation
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This paper asks the question why technical analysis rather than other theoretical models in active portfolio management. Using the CRSP-Cap Based portfolio returns between 2008 and 2013 we check for the level of weak-form efficiency by using a serial correlation test and an Augmented Dickey –Fuller test. There was mixed evidence, but on the whole there was strong evidence of inefficient market. Also we analysed size effect using technical analysis but do not support the view that small-cap stocks outperform large-cap stocks but we found strong evidence that in recent times small-cap stocks have outperformed large-cap stocks. In essence, using technical analysis has brought about the revelation of hidden stocks performance that could not have been possible using other theoretical models which is our justification for its use in active portfolio management.

TABLE OF CONTENTS LIST OF TABLES ................................................................................................................................. v

 LIST OF FIGURES ............................................................................................................................. vi 

LIST OF EQUATIONS ...................................................................................................................... vii

ACKNOWLEDGEMENT ................................................................................................................. viii 

ABSTRACT ............................................................................................................................................ x

CHAPTER ONE ..................................................................................................................................... 1 

 INTRODUCTION ....................................................................................................................... 1   

DISSERTATION STRUCTURE ................................................................................................ 4 CHAPTER TWO.................................................................................................................................... 5

LITERATURE REVIEW ...................................................................................................................... 5   

INTRODUCTION TO LITERATURE REVIEW ...................................................................... 5   

MARKET EFFICIENCYAND RANDOM WALKS ................................................................. 5   

DOES THE EFFICIENT MARKET HYPOTHESIS HOLDS? ................................................. 8   

JUSTIFICATION FOR ACTIVE PORTFOLIO MANAGEMENT ......................................... 10 

 METHODS FOR SECURITIES ANALYSIS IN ACTIVE PORTFOLIO MANAGEMENT . 12   

TOTAL RISK AND DIVERSIFICATION ............................................................................... 16   

RELATIONSHIP BETWEEN PRICE AND RETURN OF AN ASSET ................................. 17   

CAPITAL  ASSET  PRICING  MODEL  (CAPM)  AND  ACTIVE  PORTFOLIO   MANAGEMENT ..................................................................................................................................... 18   

SIZE EFFECTS AND ACTIVE PORTFOLIO MANANGEMENT ........................................ 22 

 CONCLUSION ......................................................................................................................... 25

CHAPTER THREE ............................................................................................................................. 26

METHODOLOGY AND DATA DESCRIPTION ............................................................................ 26   

INTRODUCTION TO METHODOLOGY AND DATA USED ............................................. 26   

METHODOLOGY .................................................................................................................... 26   

DATA DESCRIPTION ............................................................................................................. 27 

 CONCLUSION ......................................................................................................................... 29

CHAPTER FOUR ................................................................................................................................ 30

DATA ANALYSIS AND EMPIRICAL RESULTS .......................................................................... 30   

INTRODUCTION TO DATA ANALYSIS AND EMPIRICAL RESULTS ........................... 30   TEST FOR RANDOM WALKS AND SERIAL CORRELATION ......................................... 30 

ACTIVE PORTFOLIO MANAGEMENT: A CASE FOR TECHNICAL ANALYSIS iii  4.1.1  TEST FOR SERIAL CORRELATIONS ........................................................................... 30

4.1.2  TEST FOR RANDOM WALK.......................................................................................... 31 

 SIZE EFFECTS ......................................................................................................................... 32 

 CONCLUSION ......................................................................................................................... 36

CHAPTER FIVE .................................................................................................................................. 37

CONCLUSIONS .................................................................................................................................. 37 

 INTRODUCTION TO CONCLUSIONS ................................................................................. 37 

 BREAK DOWN OF RESEARCH WORK ............................................................................... 37

REFERENCES ..................................................................................................................................... 39

APPENDIX ........................................................................................................................................... 43                  

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APA

Tunji, O (2019). Active portfolio management: A case for technical analysis. Afribary.com: Retrieved October 17, 2019, from https://afribary.com/works/active-portfolio-management-a-case-for-technical-analysis

MLA 8th

Ogunkoya, Tunji. "Active portfolio management: A case for technical analysis" Afribary.com. Afribary.com, 09 Oct. 2019, https://afribary.com/works/active-portfolio-management-a-case-for-technical-analysis . Accessed 17 Oct. 2019.

MLA7

Ogunkoya, Tunji. "Active portfolio management: A case for technical analysis". Afribary.com, Afribary.com, 09 Oct. 2019. Web. 17 Oct. 2019. < https://afribary.com/works/active-portfolio-management-a-case-for-technical-analysis >.

Chicago

Ogunkoya, Tunji. "Active portfolio management: A case for technical analysis" Afribary.com (2019). Accessed October 17, 2019. https://afribary.com/works/active-portfolio-management-a-case-for-technical-analysis