{"id":30997,"date":"2024-11-29T13:30:00","date_gmt":"2024-11-29T05:30:00","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=30997"},"modified":"2025-01-15T15:04:21","modified_gmt":"2025-01-15T07:04:21","slug":"unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/","title":{"rendered":"&#8220;Unlocking Market Insights: Comparing Three Strategies Based on Directors&#8217; Shareholding Data&#8221;"},"content":{"rendered":"\n<figure class=\"wp-block-image aligncenter\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/%E7%B1%8C%E7%A2%BC.avif\" alt=\"TQuant Lab Director And Supervisor Holdings\u2014Which Strategy Reigns Supreme?\"\/><figcaption class=\"wp-element-caption\"><strong>Photo by\u00a0<a href=\"https:\/\/unsplash.com\/@hush52\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Hush Naidoo Jade<\/a>\u00a0on\u00a0<a href=\"https:\/\/unsplash.com\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">unsplash<\/a><\/strong><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69fa83e2a0c0c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69fa83e2a0c0c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Preface\" >Preface<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#What_is_the_Director_Holding_Ratio_and_its_Regulations_in_Taiwan\" >What is the Director Holding Ratio and its Regulations in Taiwan?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#The_Implication_of_the_Level_of_Directors_and_Supervisors_Holding_Ratio\" >The Implication of the Level of Director\u2019s and Supervisors\u2019 Holding Ratio<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#High_Directors_and_Supervisors_Shareholding_Ratio\" >High Directors&#8217; and Supervisors&#8217; Shareholding Ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Low_Directors_and_Supervisors_Shareholding_Ratio\" >Low Directors&#8217; and Supervisors&#8217; Shareholding Ratio<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Stock_Selection_Based_on_Directors_Holdings\" >Stock Selection Based on Directors\u2019 Holdings<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Trading_Logic\" >Trading Logic<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Strategy_Selection_Criteria\" >Strategy Selection Criteria<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#How_to_Implement_the_Shareholding_Strategy\" >How to Implement the Shareholding Strategy<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Backtesting_with_TEJ_Directors_Shareholding_Data\" >Backtesting with TEJ Director\u2019s Shareholding Data<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Construct_the_Trading_Signal\" >Construct the Trading Signal<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Key_Observations_in_Backtesting\" >Key Observations in Backtesting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#TEJ_Database_Comprehensive_Fundamental_Data_for_Informed_Investment_in_Taiwan\" >TEJ Database: Comprehensive Fundamental Data for Informed Investment in Taiwan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tejwin.com\/en\/insight\/unlocking-market-insights-comparing-three-strategies-based-on-directors-shareholding-data\/#Further_Reading\" >Further Reading<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Preface\"><\/span>Preface<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the stock market, the shareholding ratio of directors has always been a key indicator for investors. Changes in insider holdings often signal <strong>their confidence in the company\u2019s future development<\/strong> and have potential impacts on stock prices. However, identifying meaningful changes in shareholding ratios from vast data can be challenging for investors.<\/p>\n\n\n\n<p>To address this issue, we filter out companies with significant changes in the shareholding ratios of directors and conduct backtesting in Taiwan stock market. Through TEJ Director\u2019s Holding database, we can efficiently uncover the potential relationship between management&#8217;s actions and stock price movements, and evaluate the performance of this strategy to help investors capture hidden opportunities in the market.<\/p>\n\n\n\n<p>In this article, we will give you a comprehensive introduction to Directors\u2019 Holdings and the comparison of three strategies based on the change of shareholdings. Curious about how to use director shareholding ratios to predict stock price trends and gain an edge in your investments? Let\u2019s explore the secret of it in the following.<\/p>\n\n\n\n<div style=\"height:31px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Director_Holding_Ratio_and_its_Regulations_in_Taiwan\"><\/span>What is the Director Holding Ratio and its Regulations in Taiwan?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The directors&#8217; and supervisors&#8217; shareholding ratio refers to <strong>the proportion of shares held by the company&#8217;s directors and supervisors relative to the company&#8217;s total capital<\/strong>. The level of this ratio serves as one of the indicators of top management&#8217;s confidence in the company&#8217;s prospects. According to Article 2 of the &#8220;Regulations Governing the Shareholding Ratio of Directors and Supervisors of Public Companies and the Verification of Compliance&#8221;, companies are required to <strong>maintain a specific shareholding ratio for directors and supervisors based on their capital size<\/strong>. This legal restriction ensures that the interests of directors and supervisors align with those of the company, preventing decisions detrimental to the company&#8217;s long-term development and addressing <strong>agency problems<\/strong>.<\/p>\n\n\n\n<div style=\"height:29px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td rowspan=\"2\"><br>Paid-up Capital<\/td><td colspan=\"2\">Minimum Shareholding Ratio of Directors and Supervisors<\/td><\/tr><tr><td>Director<\/td><td>Supervisor<\/td><\/tr><tr><td>Less than 300 million<\/td><td>At least 15%<\/td><td>At least 1.5%<\/td><\/tr><tr><td>Over 300 million to 1 billion<\/td><td>At least 10%<\/td><td>At least 1%<\/td><\/tr><tr><td>Over 1 billion to 2 billion<\/td><td>At least 7.5\uff05<\/td><td>At least 0.75%<\/td><\/tr><tr><td>Over 2 billion to 4 billion<\/td><td>At least 5%<\/td><td>At least 0.5%<\/td><\/tr><tr><td>Over 4 billion to 10 billion<\/td><td>At least 4%<\/td><td>At least 0.4%<\/td><\/tr><tr><td>Over 10 billion to 50 billion<\/td><td>At least 3%<\/td><td>At least 0.3%<\/td><\/tr><tr><td>Over 50 billion to 100 billion<\/td><td>At least 2%<\/td><td>At least 0.2%<\/td><\/tr><tr><td>Over 100 billion&nbsp;<\/td><td>At least 1%<\/td><td>At least 0.1%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"has-text-align-center\">   Table 1. Shareholding ratios compiled by TEJ<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Implication_of_the_Level_of_Directors_and_Supervisors_Holding_Ratio\"><\/span>The Implication of the Level of Director\u2019s and Supervisors\u2019 Holding Ratio<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"High_Directors_and_Supervisors_Shareholding_Ratio\"><\/span>High Directors&#8217; and Supervisors&#8217; Shareholding Ratio<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When the shareholding ratio of a company\u2019s directors and supervisors is high, it is often seen as a sign of the management\u2019s active involvement in the company\u2019s operations. This is because their financial interests are closely tied to the company\u2019s performance. Moreover, it enhances external investors\u2019 confidence in the company\u2019s future, contributing to the stability of the internal management team. External investors are likely to have a more optimistic outlook on the company\u2019s long-term development when they see management <strong>\u201cstanding with the company.\u201d<\/strong> This trust can lead to <strong>positive<\/strong> market reactions, potentially driving the stock price higher.<\/p>\n\n\n\n<p>In addition, a high directors\u2019 and supervisors\u2019 shareholding ratio may indicate that management has a stronger voice in corporate governance, enabling them to more effectively implement strategic decisions. For a company with a clear development direction, this can enhance its competitiveness in the market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Low_Directors_and_Supervisors_Shareholding_Ratio\"><\/span>Low Directors&#8217; and Supervisors&#8217; Shareholding Ratio<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When the directors\u2019 and supervisors\u2019 shareholding ratio is low or significantly decreases, the market may interpret this <strong>negatively<\/strong>. A reduction in management\u2019s shareholding can be seen as a lack of confidence in the company\u2019s future prospects or even as a sign of adverse changes within the company. In such cases, external investors may grow concerned about the company\u2019s future performance and may choose to reduce their investments or withdraw entirely.<\/p>\n\n\n\n<p>This shift in market sentiment often has a negative impact on the company\u2019s stock price. Particularly in cases where directors and supervisors significantly reduce their holdings, panic selling may occur, causing the stock price to plummet rapidly. Furthermore, a low shareholding ratio among directors and supervisors could mean weaker management influence in corporate governance, making the company more susceptible to external interference\u2014a potential risk to the company\u2019s long-term stable operations.<\/p>\n\n\n\n<p>After understanding the shareholding ratio restrictions in Taiwan and how the level of shareholding ratio may reflect management&#8217;s confidence in their own company, this article will outline three investment strategies based on the TEJ shareholding ratio database. These strategies will then be evaluated using a backtesting system to assess their strengths and weaknesses, providing investors with guidance on how to use directors&#8217; shareholding data to develop effective strategies.<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Stock_Selection_Based_on_Directors_Holdings\"><\/span>Stock Selection Based on Directors\u2019 Holdings<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trading_Logic\"><\/span>Trading Logic<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We analyze changes in director shareholding using three strategies, with the backtesting period set from January 1, 2020, to December 31, 2023. According to <strong>Article 25, Paragraph 2 of the Securities and Exchange Act<\/strong>, the shareholding ratios of directors must be disclosed by <strong>the 15th<\/strong> of each month for the preceding month. Therefore, we set the rebalancing date for these strategies on the 16th of each month.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strategy_Selection_Criteria\"><\/span>Strategy Selection Criteria<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Here are three strategies according to different criteria:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Shareholding ratio above 40%<\/strong>: Ensure that the shareholding ratio of directors and supervisors meets a certain threshold, filtering for companies with high shareholding levels.<\/li>\n\n\n\n<li><strong>Top 30 shareholding ratios<\/strong>: Leverage the momentum effect by selecting the top 30 companies for investment to identify potentially higher returns.<\/li>\n\n\n\n<li><strong>Shareholding ratio increases for two consecutive months<\/strong>: Indicates strong expectations for the future by insiders, as reflected in their consecutive monthly increases in shareholding ratios.<\/li>\n<\/ul>\n\n\n\n<p>These strategies will be referred to as <strong>Strategy 1<\/strong>, <strong>Strategy 2<\/strong>, and <strong>Strategy 3<\/strong> in the following analysis. To enhance the realism of the strategies, we incorporate <strong>slippage<\/strong> and <strong>transaction fees<\/strong> into the model. This allows us to simulate the impact of price friction on trading outcomes during order execution.<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Implement_the_Shareholding_Strategy\"><\/span>How to Implement the Shareholding Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following demonstrates how we will generate the trading signals required for the Shareholding Strategy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Backtesting_with_TEJ_Directors_Shareholding_Data\"><\/span>Backtesting with TEJ Director\u2019s Shareholding Data<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We set the following data and rule to backtest:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Stock pool: Taiwan listed companies, Including both common stocks and KY stocks. Considering that <strong>smaller-cap companies typically have higher director shareholding ratios<\/strong>, the strategy does not specifically focus on the top 200 highly liquid stocks in Taiwan, which allows for more precise targeting of small to mid-cap stocks that meet the strategy&#8217;s criteria.<\/li>\n\n\n\n<li>Backtesting period\uff1aFrom 2020-01-01 to 2023-12-31<\/li>\n\n\n\n<li>Trading set\uff1aLiquidity slippage and transaction fees<\/li>\n\n\n\n<li>Benchmark\uff1aTAIEX-Total Return Index ( IR0001 )<\/li>\n\n\n\n<li>Data Source\uff1a<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/fundamental-data\/\" target=\"_blank\" rel=\"noreferrer noopener\">Director&#8217;s Shareholding Ratio from \u00a0 TEJ Director\u2019s Holding database<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/market-data\/\" target=\"_blank\" rel=\"noreferrer noopener\">Stock price and trading volume from TEJ Stock Price database<\/a><\/li>\n\n\n\n<li>Initial capital of 1,000,000 NTD, Max leverage 1<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Construct_the_Trading_Signal\"><\/span>Construct the Trading Signal<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After obtaining price-volume and historical data, we set up the 3 strategies:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Strategy 1: Input shareholding ratio data; buy when the board of directors and supervisors&#8217; shareholding ratio <strong>exceeds 40%<\/strong>, and sell otherwise.<\/li>\n\n\n\n<li>Strategy 2: Input shareholding ratio data; buy when the shareholding ratio ranks among <strong>the top 30<\/strong>, and sell otherwise.<\/li>\n\n\n\n<li>Strategy 3: Input consecutive two-month shareholding ratio change data; buy when the changes for t<strong>wo consecutive periods are both greater than zero<\/strong>, and sell otherwise.<\/li>\n<\/ul>\n\n\n\n<p>According to Article 25, Paragraph 2 of the \u201cSecurities and Exchange Act\u201d, the shareholding ratios of directors and supervisors must be disclosed before the 15th of each month for the previous month&#8217;s data. Therefore, the strategy rebalancing date is set as the 15th of each month.<\/p>\n\n\n\n<div style=\"height:29px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/www.tejwin.com\/en\/insight\/stock-selection-factors-research-combining-insider-ownership-and-momentum-factors\/\" target=\"_blank\" rel=\"noreferrer noopener\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXdWGxxDlB9HuO97dftIXNqGVz6Avd0IZ87cKjTY6gpT3PKTiXguQxfWbOrQUyFzL-KTPOexE0faU1246mBCkWozhNAd_5MP8k83QeTIcKX1ym8ZflDgNl1XXqHxG9Jw4uL7MvOW4hbbYf7rUSdosgkeyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\"\/><\/a><\/figure>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Observations_in_Backtesting\"><\/span>Key Observations in Backtesting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXcOVj8rAwwpZyTrjhuHPlCwAY5B2info37VEwRw9xTwfzG1tThKA6UUxvpwAhN2BKyYdD2kQIGZIUAeE03vqyivsdxNriWb9y-sUPW2B9lUCnXPJLS5QMQ4DjsXP7LTeC01ilvdKYGsHS20K-ojePYkeyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\">Table 2. The comparison of three strategies<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>From the data above, the <strong>annualized returns<\/strong> for the three strategies are <strong>17.3%, 18.87%, and 19.64%<\/strong>, all outperforming the market. However, observing the performance charts reveals that Strategy 1 l underperformed the market for most of the time before 2023, while Strategy 2 and Strategy 3 experienced fluctuations, achieving noticeably superior performance only in the later stages. This indicates that these strategies may struggle to outperform the market in the short term and require long-term holding to fully realize their advantages.<\/p>\n\n\n\n<p>Furthermore, the <strong>Sharpe ratios<\/strong> for the three strategies are <strong>1.09, 1.24, and 1.27<\/strong>, showing that Strategy 3 delivers the best risk-adjusted returns. This further confirms that the ratio of director holding possesses predictive power. However, these strategies still require the patience of long-term holding to unlock their full investment potential.<\/p>\n\n\n\n<p>Finally, the <strong>maximum drawdowns<\/strong> are &#8211;<strong>29.9%, -21.95%, and -28.29%<\/strong>. For conservative investors, it is recommended to assess their risk tolerance to ensure they can maintain a stable mindset and respond appropriately during significant market fluctuations, avoiding adverse impacts on investment decisions caused by emotional stress.<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXc_EZUx86cigH4ElIoJxqvVu7GiijTthp5FKW6e0JZnFKuAx8DMCiXOAFfQuQDp6llAJujAkRMPFT4ADYyO2Tl1ME3ES_q7DCoHxa-JxyZTpFeXgVPBzWueVhOxB2pjC1ClF2wSLXq77JYm0lRPVI0keyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\">Figure 1. The results of Strategy 1<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXdProbrkAPy1q2-F-WvXRr75mpedRKLEnWVVI4uOKC6MYbCOtUHaHUCPlZ42LlfG23NFXmz6wemw2Ika30cll0QbiW61Ls9pmDZBnr8FqpNUhRWZE-K1DW-ZZAFKKOGmoq6tfM43ZGMtTP849z0HcYkeyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\u4e00\u5f35\u542b\u6709 \u6587\u5b57, \u7e6a\u5716, \u884c, \u5716\u8868 \u7684\u5716\u7247\n\n\u81ea\u52d5\u7522\u751f\u7684\u63cf\u8ff0\"\/><\/figure>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"has-text-align-center\">Figure2. The results of Strategy 2<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXexF3RytR2JB0lxT814VmKNFXCb2NkTTtLN8lqAQshsDloZkr_I-C9R4uKDr8QfsFeqObfCrP-DWzvDSMM8KMcSvr6wO1hfB5vrDfBI_3dUXnM6AIo3mZz8BExqMp6AHYVhDVBBNeB4AQ9p9jiBS0AkeyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\u4e00\u5f35\u542b\u6709 \u6587\u5b57, \u7e6a\u5716, \u884c, \u5716\u8868 \u7684\u5716\u7247\n\n\u81ea\u52d5\u7522\u751f\u7684\u63cf\u8ff0\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\">Figure 3. The results of Strategy 3<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXdr1mNetJLWedezH9gVN6fqHW14sjjM2C_iU-QowvEoUL2QYLX-5Ry6b_nQjcGtkM1brnkZo1azFS-IZ1yZmB1H1uJZxSleXRts8iE1rSfHZ7WTjsuTt-H8oivgDPv0fFgiIoMa9C0VTUNXdSmD0IYkeyZNd47swZfiPsgPcAOGZm5J3Q.jpg\" alt=\"\u4e00\u5f35\u542b\u6709 \u6587\u5b57, \u5716\u8868, \u8a2d\u8a08 \u7684\u5716\u7247\n\n\u81ea\u52d5\u7522\u751f\u7684\u63cf\u8ff0\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\">Figure 4. The number of months with negative returns<\/p>\n\n\n\n<p>From the chart, it can be observed that t<strong>he number of months with negative returns<\/strong> for the three strategies are <strong>14, 17, and 10<\/strong> months, respectively. Strategy 1 and Strategy 2 experienced more months of negative returns, which could expose investors to greater fluctuations during the holding period, potentially affecting their confidence and patience in executing the strategies. In contrast, Strategy 3 had the fewest negative return months at just 10, achieving stable returns with fewer loss months, thereby reducing stress for investors.<\/p>\n\n\n\n<p>Additionally, the <strong>Sortino ratios<\/strong> for the three strategies are <strong>1.4, 1.67, and 1.65<\/strong>, indicating that Strategy 2 and Strategy 3 provide better risk-adjusted returns. Strategy 3 not only has the fewest months with negative returns but also maintains a high Sortino ratio, highlighting its risk management advantages. This allows investors to remain confident in following the strategy even during periods of downside risk.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXdvrkUVn_Cl_pfaQh05XgDFchA76er9TRvh0LoD7q02Xzc_3fUFK2sLphIwqqWOvdYZx76UfQZWC1KsmeTx2gkJlIqR5zjpmQoKMw6KCR_ehmzio2yLaubuc89Yti3l-uaU47Ty4lN_cDXG8_TvcKYkeyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\u4e00\u5f35\u542b\u6709 \u6587\u5b57, \u87a2\u5e55\u64f7\u53d6\u756b\u9762, \u8a2d\u8a08 \u7684\u5716\u7247\n\n\u81ea\u52d5\u7522\u751f\u7684\u63cf\u8ff0\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\">Figure 5: TOP 10 stock exposures for each strategy<\/p>\n\n\n\n<p>Further analysis of the <strong>TOP 10 stock exposures<\/strong> for each strategy reveals that the average single-stock exposure is <strong>0.004, 0.035, and 0.0125<\/strong>, respectively. This indicates that Strategy 1 holds the largest number of stocks, followed by Strategy 3, and lastly Strategy 2.&nbsp;&nbsp;<\/p>\n\n\n\n<p>However, the <strong>maximum drawdowns<\/strong> for Strategies 1 to 3 are <strong>-29.9%, -21.95%, and -28.29%<\/strong>, respectively. Although Strategy 1 attempts to mitigate risk by holding more stocks, it still fails to reduce its downside risk. This also results in Strategy 1 having the lowest Sortino ratio among the three strategies.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/6_AD_4nXd256zs6LO3L93Tu3K0hGlzDemGWrGu78p_jEunvaX3UjSNMw5rVWJqiQmQYqHKfIyGBay295CeUj9Gkt308TdXWB3R4IFvLyKWNCJpDji4-xCAMCNUovppezgENfHKvQSVjROrkxSznytl0LFV0gkeyZNd47swZfiPsgPcAOGZm5J3Q.png\" alt=\"\u4e00\u5f35\u542b\u6709 \u6587\u5b57, \u5716\u8868, \u8a2d\u8a08, \u6536\u64da \u7684\u5716\u7247\n\n\u81ea\u52d5\u7522\u751f\u7684\u63cf\u8ff0\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\">Figure 6: Maximum drawdowns for each strategy<\/p>\n\n\n\n<p>Finally, we analyze the top five drawdowns using the chart. The data shows that the <strong>average drawdown durations <\/strong>are <strong>118.4 days, 117.8 days, and 99.8 days<\/strong>, with the longest drawdown periods concentrated in 2022. Over the approximately 1,000 trading days spanning four years, the days with significant drawdowns account for around 10% to 12%. This highlights that investors executing such strategies must be mentally prepared and ready to handle potential long-term fluctuations.<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>From the results of the three strategies, each strategy exhibits different risk and return characteristics. <strong>Strategy 3<\/strong> demonstrates <strong>greater stability<\/strong>, while <strong>Strategy 2<\/strong> achieves the <strong>smallest drawdown<\/strong>. Notably, all three strategies, constructed by the shareholding ratio of directors, outperform the market in terms of returns with Sharpe ratios exceeding 1, confirming the predictive power of this approach.<\/p>\n\n\n\n<p>Among the three strategies, we consider <strong>Strategy 2 and Strategy 3 as reliable options<\/strong>. Their entry and exit conditions can be further tailored to meet investors&#8217; preferences. In contrast, Strategy 1, based on high shareholding ratios, still has room for improvement.<\/p>\n\n\n\n<p>Applying the shareholding ratio of directors can achieve superior risk-adjusted returns over the long term, making it suitable for conservative investors seeking stable performance. However, the length and frequency of drawdown periods emphasize that these strategies are not short-term arbitrage tools but better suited for investors with patience.<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TEJ_Database_Comprehensive_Fundamental_Data_for_Informed_Investment_in_Taiwan\"><\/span>TEJ Database: Comprehensive Fundamental Data for Informed Investment in Taiwan<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Making informed investment decisions in Taiwan\u2019s stock market requires access to reliable and detailed data. TEJ\u2019s Fundamental Data service, which includes extensive director and supervisor shareholding information, provides investors with the tools needed to develop precise and effective strategies.<\/p>\n\n\n\n<p>With features like Point-in-Time Data, TEJ ensures that all historical information is time-accurate and free from lookahead bias, enabling the creation of trustworthy investment models. This level of data precision helps investors gain deeper insights into market dynamics and uncover valuable opportunities with confidence.<\/p>\n\n\n\n<p>For those focused on building long-term, stable strategies, TEJ\u2019s database is an indispensable resource. From director shareholding ratios to broader financial and corporate data, TEJ offers a robust platform tailored to the nuances of Taiwan\u2019s market.<\/p>\n\n\n\n<p>Discover how TEJ\u2019s Fundamental Data can elevate your investment strategies: <a href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/fundamental-data\/\">TEJ Fundamental Data<\/a>.<\/p>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Further_Reading\"><\/span>Further Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/en\/insight\/2024-new-independent-director-regulations-hits-the-road-what-impacts-may-be-led-to\/\">2024 New Independent Director Regulations hits the road! What impacts may be led to?<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/en\/insight\/insider-transfers\/\" target=\"_blank\" rel=\"noreferrer noopener\">&#8220;Block Trades&#8221; as Warning Signals? Analyzing Insider Transfers and Changes in Stock Prices Using TEJ API<\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the stock market, the shareholding ratio of directors has always been a key indicator for investors. Changes in insider holdings often signal their confidence in the company\u2019s future development and have potential impacts on stock prices. However, identifying meaningful changes in shareholding ratios from vast data can be challenging for investors.<\/p>\n","protected":false},"featured_media":30429,"template":"","tags":[3379,3419,3416,2537],"insight-category":[50,1356],"class_list":["post-30997","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-directors-holdings","tag-fundamental-data","tag-tquant","tag-2537","insight-category-fintech","insight-category-tquant-lab-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/30997","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":18,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/30997\/revisions"}],"predecessor-version":[{"id":32207,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/30997\/revisions\/32207"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/30429"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=30997"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=30997"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=30997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}