Tests of quantitative investing strategies of famous investors: case of Thailand
-
DOIhttp://dx.doi.org/10.21511/imfi.14(3-1).2017.06
-
Article InfoVolume 14 2017, Issue #3, pp. 218-226
- Cited by
- 1353 Views
-
651 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
This research studied quantitative investing strategies of famous investors in the Stock Exchange of Thailand from 2002 to 2016. This study found that the Graham’s net nets, Dreman’s contrarian, Fisher’s super stock, O’Neil’s CANSLIM, Slater’s zulu principle, Neff’s Cheapo, O’Shaughnessy’s tiny titans, Greenblatt’s magic formula, Carlisle’s acquirer’s multiple and Piotroski’s F-score strategies beat the market (SET TRI). It also found that the Benjamin Graham’s net nets strategy which used the market capitalization of less than two thirds of net current assets value (NCAV) criterion produced the highest return among the strategies used. However, the Tobias Carlisle’s Acquirer’s multiple strategy which used EBIT to enterprise value (EBIT/EV) to sort stocks for 30 stocks yielded the highest risk-adjusted return.
- Keywords
-
JEL Classification (Paper profile tab)G11, G14
-
References31
-
Tables4
-
Figures1
-
- Figure 1. Maximum drawdown
-
- Тable 1. Returns from each portfolio in each year, compared to the returns from the SET TRI
- Table 2. Number of stock holdings in each portfolio
- Table 3. The Sharpe ratio of each portfolio and of the Stock Exchange of Thailand
- Table 4. Risk and return for all 10 portfolios over 14 years
-
- Abarbanell, J., & Bushee, B. (1997). Fundamental analysis, future earn¬ings, and stock prices. Journal of Accounting Research, 35(1), 1-24.
- Abarbanell, J., & Bushee, B. (1998). Abnormal returns to a fundamental analysis strategy. The Accounting Review, 73(1), 19-45.
- Barbee, W., Mukherji, S., & Raines, G. (1996). Do sales-price and debt-equity explain stock returns better than book-market and firm size? Financial Analysts Journal, 52(2), 56-60.
- Bildersee, J. (1993). The performance of Japanese common stock in relation to their net current asset values. Japan and the World Economy, 5(3), 197-215.
- Brooks, C., Chow, W., & Ward, C. (2001). Can profitable trading strategies be derived from investment best-sellers? Journal of Asset Management, 2(2), 162-179.
- Carlisle, T. (2014). Deep value: Why activists investors and other contrarians battle for control of losing corporations. Wiley Finance.
- Chahin, S. & Choudhry, T. (2010). Price to earnings, growth ratio and value vs. growth based strategies: some European evidences. Social Science Research Network, 19(4).
- Cheh, J., Kim, I., & Lee, J. (2012). Can a simplified version of CAN SLIM investment strategy produce abnormal returns for ordinary investors? Pan-Pacific Journal of Business Research, 3(1), 106-131.
- Dreman, D., & Lufkin, E. (1997). Do contrarian strategies work within industries? The Journal of Investing, 6(3), 7-29.
- DrKW Macro Research (2006). Global equity strategy: the little note that beats the markets.
- Dudzinski, J., & Kunkel, R. (2014). Ben Graham’s NCAV (net current asset value) technique in the 21st century. The Journal of Investing, 23(1), 17-26.
- Fisher, K. (1984). Super Stock. McGraw-Hill. (pp. 63-77).
- Gillette, L. (2005). An empirical test of German stock market efficiency. Center for Applied Statistics and Economics, Humboldt-Universitat zu Berlin, Germany.
- Graham, B. (1949). The intelligent investor. In J. Zweig (2006) (Ed.), The intelligent investor (revised edition). Harper Business Essential.
- Greenblatt, J. (2006). The little book that beats the market. Wiley.
- Kumaran, S. (2013). Drawdown risk in mutual fund’s performance. Journal of Finance and Investment Analysis, 2(2), 89-106.
- Larkin, P. (2009). Can individual investors capture value premium? Journal of Business and Economic Research, 7(5), 25-33.
- Lehmann, B. (1990). Fads, martingales, and market efficiency. The Quarter Journal of Economics, 105(1), 1-28.
- Lo, A. & MacKinlay, C. (1990). When are contrarian profits due to stock market overreaction? The Review of Financial Studies, 3(2), 175-205.
- Lutey, M., Crum, M., & Rayome, D. (2013). Outperforming the broad market: an application of the CANSLIM strategy. ASBBS e-Journal, 9(1), 90-96.
- Mohanram, P. (2005). Separating winners from losers among low book-to-market stocks using financial statement analysis. Review of Accounting Studies, 10(2-3), 133-170.
- Najafi, M., & Asgari, F. (2013). Using CANSLIM analysis for evaluating stocks of the companies admitted in Tehran Stock Exchange. Journal of American Science, 9(4s), 129- 134.
- Neff, J. (2001). John Neff on Investing. Wiley.
- Olson, D., Nelson, J., Witt, C., and Mossman, C. (1998). A test of the investor’s daily stock rank¬ing system. Financial Review, 33(2), 161-176.
- O’Neil, W. (2009). How to make money in stocks. (4th Edition). New York: McGraw-Hill.
- Oppenheimer, H. (1986). Ben Graham’s net current asset values a performance update. Financial Analysts Journal, 42(6), 40-47.
- O’Shaughnessy, J. (2006). Predicting the markets of tomorrow. New York: McGraw- Hill. (pp. 163-166).
- Peters, D. (1991). Valuing a growth stock. The Journal of Portfolio Management, 17(3), 49-51.
- Piotroski, J. (2000). Value investing: the use of historical financial statement information to separate winners from losers. Journal of Accounting Research, 38(Supplement: studies on accounting information and the economics of the firm), 1-41.
- Slater, J. (2010). Beyond the zulu principle: extraordinary profits from growth shares. Harriman Modern Classics.
- Xiao, Y., & Arnold, G. (2008). Testing Benjamin Graham’s net current asset value strategy in London. The Journal of Invest¬ing, 17(4), 11-19.
-
A two-step method for assessing enhanced value in turnaround, spin-off, and value stocks
Nicolas Pfister
,
Michael J. Kendzia ,
Jan-Alexander Posth
doi: http://dx.doi.org/10.21511/imfi.21(3).2024.33
Investment Management and Financial Innovations Volume 21, 2024 Issue #3 pp. 412-429 Views: 147 Downloads: 47 TO CITE АНОТАЦІЯTo assess outright and relative value opportunities in stocks and benchmark their performance against an index with global relevance, it is important to achieve and measure risk-adjusted excess returns. Academic and corporate research has focused quite extensively on analyzing stock returns and comparing the outperformance of specific investment strategies, with value investing being one of the most prominent and longest-known factor strategies. In this event study, to test for the existence of risk-adjusted excess returns, or alpha, a novel two-step approach is proposed to assess Enhanced Value in single stocks for three different investment approaches: plain value investing, investing in spin-offs, and investing in turnaround companies. While the first step of the two-step approach screens companies for a combination of financial company characteristics, the second step ranks and sorts them by either their price-earnings ratio or by their price-book ratio, thus “enhancing” the value assessment. Their short- and mid-term stock performance is investigated for an investment horizon of one year, three years, and five years. Stocks of value companies, spin-offs, and turnaround companies outperform the S&P 500 benchmark on average and on a risk-adjusted basis for all three investment horizons when tested for Enhanced Value with the novel two-step approach. The analysis results provide deeper insights into how the value factor in its different characteristics needs to be understood in the context of investment strategies and how it potentially can be applied to stock selection and portfolio construction, resulting in investment strategies showing a risk-adjusted outperformance.
