Abstract
The problem we address in this chaper is to develop and test a market timing strategy for a property investor who has to decide the allocation of investment funds between the risk-free savings deposit and the comparatively risky property investment. We develop such a market timing strategy using a stochastic dynamic programming technique for optimal decision approach in the property market in Singapore. Using the information on the cash and property assets held by the investors as well as the predicted price movement, this strategy generates recommendation on investment action with the objective to attain superior investment returns. A recommended investment action is one of the four possible investment actions in a typical property investment scenario, namely: buy, hold, sell and wait. The investment performance of this market timing strategy is compared with that of the buy-and-hold strategy. Results from the simulation study for the 20-year period from 1977/Q1 to 1996/Q4 have been encouraging. The proposed market timing strategy is shown to capable of achieving superior investment returns in the Singapore property market.
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Chin, T.C., Mills, G.T. (2001). A Stochastic Dynamic Programming Technique for Property Market Timing. In: Jain, L., De Wilde, P. (eds) Practical Applications of Computational Intelligence Techniques. International Series in Intelligent Technologies, vol 16. Springer, Dordrecht. https://doi.org/10.1007/978-94-010-0678-1_9
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DOI: https://doi.org/10.1007/978-94-010-0678-1_9
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