Comparison of the Return of Investment from Securities Screening Using Financial Ratios and Security Trading Methods: Evidence from Thailand

Abstract

This research aims to study investment in the Stock Exchange of Thailand based on historical financial ratios, namely, the return on equity (ROE) and price-earnings ratio (P/E), and screening securities together with buy-and-sell timing using technical analysis tools for stock selection to build a stock trading model. This research utilizes financial statement data from the companies listed in the Stock Exchange of Thailand from 2014 to 2018, selecting the stocks to invest using Greenblatt's Magic Formula and identifying buy-and-sell timing by a simple moving average (SMA). The stocks were reselected annually from 2014 to 2018. The study compared returns from 3 methods; it was found that the portfolio that identified buy-and-sell timing by technical analysis tools, the 6-month simple moving average, had the best performance, followed by the 12-month simple moving average and buy-and-hold portfolio, consecutively.