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

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.