Making Profit in Stock Investment Before XD Dates by Using Genetic Algorithm - Innovative Management in Information and Production - page 329

Making Profit in Stock Investment Before XD
Dates by Using Genetic Algorithm

Tatcha Sudtasan and Komsan Suriya

Abstract This study extends the work of Sudtasan (Int. J. Intell. Techn. Appl.
Stat. 5 , 143-155, 2012) to apply genetic algorithm to detect regime switching
of eight stock prices before XD dates in the stock exchange of Thailand during
2005-2011. It reveals that regime switching does exist before XD dates only in
the first half of the year. The study successfully discovers that ADVANC and PTT
are good for short-term investment. CPALL and SCC are appropriate for medium-
term investment. CPF, IVL, KBANK, and TCAP are potential for the long-term
investment. Average buying days for all stocks are around 31 days before the XD
dates. Rates of return of the investment in the first half of the year are higher than in
the second half. Average annual rate of return is around 76 %. Technically, genetic
algorithm without mutation performs better than a model with mutation. For the
performance of the best genetic algorithm, a model with zero mutation rate that is
applied to the data in the first half of the year can extract around 62 % of the highest
potential profit.

Keywords Genetic algorithm ￿ Stock investment ￿ XD dates ￿ Regime

switching ￿ Stock Exchange of Thailand

1 Introduction

XD is an abbreviation of excluding dividend. Before XD dates, it is possible that a
stock price will increase especially the stock which pays a good dividend rate. This
is because the time to receive the dividend becomes shorter and shorter for everyday
before XD dates. An investor will receive the higher and higher yield if the stock
price stays at the same level.