Methodology for building trader's investment strategy based on assessment of the market value of the company

Abstract

Purpose: The purpose of this research is the formation of a methodology for investment decision making by a trader in the stock market, based on the enterprise value indicators. Design/Methodology/Approach: The methodology for making investment decisions of a stock trader is based on a method of descriptive statistics used to describe the findings of the analysis of the dynamics of selected indicators characterizing the level of the company’s shares market value, a method of grouping statistical data used in the process of forming groups of selected indicators characterizing the level of shares market value, a сombinating method used for building a trader’s investment strategy and choosing the optimal combination of financial indicators (as well as ranking the formed combinations by profitability) that characterize the level of the market value of the company’s shares in the process of investment decision making. Findings: The findings of the study revealed that to eliminate financial risks and increase the efficiency of trading operations in the stock market, the trader’s investment strategy can be based on an economic and mathematical analysis of a set of indicators that evaluate the company’s market value. The combinatorics method and regression analysis method can be efficiently used as methods of building a trader’s investment strategy. Practical Implications: The proposed methodology allows to comprehensively assess the level of the enterprise value and on the basis of which is possible to develop an effective trader’s investment strategy, which can become a practical tool in conducting investment operations. Originality/Value: The use of the combinatorics method allows us to adjust the trading (investment) strategy of the trader to the specifics of the external and internal factors of functioning of each individual company and also provide a comprehensive tool for investment decisions making.