The analysis of chasing returns strategy in equity funds

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Abstract

Most of the new investors, who are dominated by millennial investors, do not understand the basics of the capital market, so they have to suffer losses. Therefore, a strategy for investing in mutual funds is needed. This study aims to compare the performance of return-chasing investments with the buy-and-hold strategy in providing the best return to stock mutual fund investors. Beers (2020) states that “buy-and-hold” is a strategy in which investors buy stocks (or other types of securities, such as exchange-traded funds) and hold them for a long time regardless of market fluctuations. The data used is the net asset value of mutual funds which is then processed to obtain rank one based on annual returns. Simulations will be carried out to see the investment results of the two strategies and then the Wilcoxon signed-rank statistical test will be carried out on the profit/loss percentage to see the significance of the difference. The results of statistical tests show that there is no significant difference in investment returns between the chase return and buy and hold strategies. This result indicates the chasing return strategy provides much better investment returns than the buy-and-hold strategy for five periods on mutual fund instruments. The implication of this research for investors in using a chasing return strategy is that investors must use technical analysis, namely analyzing and finding out which mutual funds have the best prospects in that year.

Keywords: Mutual Funds, Buy, Hold, Chasing Returns, Investment, Decision-Making

Authors’ individual contribution: Conceptualization — I., M., and R.R.N.; Methodology — I., A.G., and A.P.; Investigation — I., M., and Z.M.D.; Resources — M.; Writing — Original Draft — A.P.; Writing — Review & Editing — M., A.S., and S.F.P.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G11, G14, G18, G23

Received: 21.01.2023
Accepted: 11.01.2024
Published online: 15.01.2024

How to cite this paper: Iriyadi, Meiryani, Syamil, A., Naldo, R. R., Daud, Z. M., Gui, A., Purnomo, A., & Persada, S. F. (2024). The analysis of chasing returns strategy in equity funds. Corporate & Business Strategy Review, 5(1), 66–76. https://doi.org/10.22495/cbsrv5i1art7