Sebelas Maret International Conferences, The 2nd INCREDIBLE

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Beating Benchmarks by Bundling Bouncy Baskets
Ravi Kashyap

Building: Parallel Session 3
Room: E
Date: 2020-10-27 04:15 PM – 05:30 PM
Last modified: 2020-10-22


We consider in detail an investment strategy, titled “The Bounce Basket”, designed for someone to express a bullish view on the market by allowing them to take long positions on securities that would benefit the most from a rally in the markets. This investment concept combines macroeconomic views with characteristics of individual securities to beat the market returns. The central idea of this theme is to identity securities from a regional perspective that are heavily shorted and yet are fundamentally sound with at least a minimum buy rating from a consensus of stock analysts covering the securities. We discuss the components of creating such a strategy including the mechanics of constructing the portfolio. Using simulations, in which securities lending data is modeled as geometric brownian motions, we provide a few flavors of creating a ranking of securities to identity the ones that are heaving shorted. An investment strategy of this kind will be ideal in market scenarios when a downturn happens due to unexpected extreme events and the markets are anticipated to bounce back, especially as observed during the Coronavirus pandemic in 2019-2020.