Algorithmic fundamental trading
|Author:||Mgr. Vojtěch Pižl|
|Year:||2016 - summer|
|Leaders:|| prof. PhDr. Ladislav Krištoufek Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||This thesis aims to apply methods of value investing into developing field of algorithmic
trading. Firstly, we investigate the effect of several fundamental variables on stock returns
using the fixed effects model and portfolio approach. The results confirm that size and bookto-market
ratio explain some variation in stock returns that market alone do not capture.
Moreover, we observe a significant positive effect of book-to-market ratio and negative effect
of size on future stock returns. Secondly, we try to utilize those variables in a trading
algorithm. Using the common performance evaluation tools we test several fundamentally
based strategies and discover that investing into small stocks with high book-to-market ratio
beats the market in the tested period between 2009 and 2015. Although we have to be careful
with conclusions as our dataset has some limitations, we believe that there is a market
anomaly in the testing period which may be caused by preference of technical strategies over
value investing by market participants.