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An Analysis and Evalutaion of Investement Strategies

Efficient Markets Hypothesis has been recently more often challenged on base of the empirical evidence which was suggested not be consistent with the theory such as excess volatility, market seasonalities, autocorrelation and predictability of equity returns. There is still ongoing discussion on relevancy and interpretation of these phenomenons and its consequences in investment strategy. This work link empirical data gathered from equity markets to equity markets theory and investment strategy framework. Importance of the work lies in providing guidance to investors on capital allocation on equity markets. Utility of three investment strategies was evaluated in this work which were buy&hold (index), contrarian and momentum. Research is focused on research of mutual funds and custom portfolios in regard to their returns and investment strategy. In mutual funds research the funds were categorized on base of their investment strategy and performance parameters were evaluated to generalize which strategies provided the best results. In research of stock returns three portfolios were constructed and returns analyzed in search for mean reversion and autocorrelation patterrns. Using automation of some calculations provided by VBA programming language enabled processing of large data sets for more than 70 stock with daily trading data mostly back to 1990. Research output suggests superiority of buy&hold strategy which is linked to Effcient Market Hypothesis. Buy&hold was shown to produce best risk-adjusted returns. This apply to both mutual funds and stock portfolios returns. Some less common patterns were observed in stock portfolios and possible explanation suggested within Efficient Markets Hypothesis framework.

Introduction

Critical Review of Literature
Efficient Markets Hypothesis
Seasonalities and Excess Volatility
Behavioral Finance and New Views on Market Efficiency
Technical Analysis
Portfolio Theory and Risk Measure
Investment Strategies
Mutual funds

Methodology and Data Collection
Mutual Funds Investment Strategies
Portfolios Returns and Mean Reversion
Economic Background of the US Equity Market 1990 - 2008

Research Findings and Analysis
Mutual Funds Investment Strategies
Analyses of Funds with Distinctive Investment Strategies
Portfolios Returns and Mean Reversion
Conclusions and Recommendations

Abbreviations

Bibliography

Appendices

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