| dc.description.abstract | The purpose of this study is to conduct a comparative analysis of stop-loss and buyand-hold strategies by investigating if the stop-loss strategies outperform the buy-andhold strategies. The evaluation criteria of whether stop-loss strategies can deliver
better results are defined as cumulative and mean returns. The study is conducted on
daily returns data for stocks listed on the NSE 20 Share Index during the time period
between January 2000 and December 2014 divided into holding periods of one year.
We choose the beginning of each year as an arbitrary starting date for the holding
periods. The performance of stop-loss strategies is tested by the trailing stop-loss
where a stock is sold if the price reaches a certain percentage below the highest price
since the starting date. The tested stop-loss strategies are 10%, 15%, 20%, 25% and
30% stop-loss strategies. We find only the 30% stop-loss strategy outperforming the
buy-and-hold portfolio strategy. This means that a stock is sold if it declines by 30%
from its highest price during the holding period in-order to limit on losses. During the
bearish years all the stop-loss strategies outperformed the buy-and-hold strategy.
However, during the bullish years, the buy-and-hold strategy outperformed the stoploss strategies. The stop-loss strategies perform in a more effective and consistent
fashion when it comes to minimizing stock return variances The study therefore
recommends the application of stop-loss strategies to a stock portfolio in order to
minimize losses especially during market downturns. | en_US |
