Global Journal of Business Management

ISSN 2736-1721

Global Journal of Business Management ISSN 2736-1721 Vol. 15 (1), pp. 001-018, January, 2021. © International Scholars Journals

Full Length Research Paper

Research on co-movement effects of conglomerate stock prices and derived investment strategies

Hsiao-Fen Hsiao1, Szu-Hsien Lin2,3* and Ai-Chi Hsu4

1Department of Finance, MingDao University, Taiwan.

2Department of Business Administration, National Chung Cheng University, Taiwan.

3Department of Finance, TransWorld University, Taiwan

4Department of Finance, National Yunlin University of Science and Technology, Taiwan.

Accepted 21 November, 2020

Abstract

This study investigated the co-movement in stock indices between Taiwan business group members to find investment arbitrage portfolios. Two investment strategies, called co-integration model and quasi-arbitrage model to arbitrage, were developed and thus allowed excess return in Taiwan capital market to be obtained. Finally, the proposed quasi-arbitrage strategy was compared with the co-integration model to identify which had the higher annual return. The empirical results showed that the co-movement in stock indices between Taiwan business group members did exist. The predicted investment annual return of the quasi-arbitrage model was higher than that of the co-integration model. Therefore, the quasi-arbitrage model was the better investment strategy.

Key words: Conglomerate, business group, co-movement, quasi-arbitrage model, co-integration model.