Market Valuations based on CAPE–A Deeper Dive
We have discussed market valuations in the past, but the issue of market valuations was recently raised on CNBC, when Robert Shiller suggested he may shift out [...]
The Wrong Way to Pick Value Investing Funds
US News laundry lists their top 10 "Value Investing Funds," or Value Investing ETFs, in their recent article: http://money.usnews.com/funds/etfs/rankings/value-funds The criteria (and weighting) for selecting so-called [...]
Where are the Cheap Firms Internationally?
Last week, Wes had a short post entitled, Where are the Cheap Firms? The post showed that when we look at the cheapest stocks in [...]
Where are the Cheap Firms?
Energy (mostly oil-related) and consumer discretionary (brick & mortar retailers). Cheap--or at least relatively cheap--based on enterprise multiples.
Why Indexing and “Smart Beta” Are So Popular
Asset Manager Contracts and Equilibrium Prices Buffa, Vayanos, and Woolley (2014) A version of the paper can be found here. Want a summary of academic papers [...]
Value Investing: 2014 Value Stock Research Recap
The success and failure of value investing can be boiled down into two components: Buy Cheap Stuff Avoid Behavioral Bias Buy Cheap Stuff Ben Graham outlined [...]
Value Investing: Digging Manager Graveyards Since 1963.
Following value strategies can be hazardous to one's wealth in the short run. Oil stocks are a great example of the challenge value investors face: The stocks [...]
Oil Stocks: A Real-Time Case Study in Value Investing
I just took a snapshot of the front page of Yahoo Finance, CNBC.com, and Bloomberg.com: Bloomberg.com @ 1725 EST CNBC.com @ 1725 [...]
Quant Value $19.99 Book Deal is Over
Wow. We blew out 300+ books in a few weeks. There are a lot more quant geeks out there than I originally suspected. Holy mackerel! [...]
Chatting Quant Value @ Wharton Today–Business Radio
http://businessradio.wharton.upenn.edu/programs/behind-the-markets-with-jeremy-siegel/ I'll be chatting with the "Jeremys" on Sirius Radio on Business Radio Channel 111. @ 1pm EST Hosts Jeremy Siegel Professor Jeremy Siegel is [...]
Mission Impossible: Beating the Market Forever
A quick glance at the most recent Berkshire Hathaway annual report (PDF) highlights an amazing data point: Warren Buffett has compounded at 19.7% a year from 1965 through 2013; the S&P 500 Total Return Index has compounded at 9.8% a year from 1965 through 2013. The immediate reaction to these figures is predictable: “Warren Buffett is an investing god, so we should buy Berkshire Hathaway and throw away the keys.” The gut reaction is that Buffett can continue to beat the market forever. Unfortunately, as this post highlights, this is an impossible feat.
Quantitative Value Research: NCAV/MV Factor
Testing Benjamin Graham's Net Current Asset Value Strategy in London Xiao and Arnold A version of the paper can be found here. Want a summary of [...]
Quantitative Value Research: Long-term P/E Ratio
The Long-Term Price-Earnings Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Face-ripping Drawdowns and the Magic Formula
Due to a surge of interest from our "Long Cheap; Short Expensive. Buyer Beware" post, we decided to analyze the impact of changing the net exposure of the Magic [...]
Quantitative Value Research: Weighted P/E Bracket
Decomposing the Price-Earning Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Quantitative Value Research: A Summary of Various Value Metrics!
Analyzing Valuation Measures: A Performance Horse-Race Over the Past 40 Years Gray and Vogel A version of the paper can be found here and here. Want a [...]
Digging into the Enterprise Multiple Value Factor
New Evidence on the Relation Between the Enterprise Multiple and Average Stock Returns Loughran and Wellman A version of the paper can be found here. (Also described [...]
Value investing backtests: Our analysis of 13 AAII Value Strategies
Having spent 15+ years conducting value investing backtests to find the holy grail of systematic value investing, I sometimes wonder the following: Is there any [...]
Quantitative Value Research: Cyclically-adjusted B/M (CA-BM) Factor
On the Performance of Cyclically Adjusted Valuation Measures Gray and Vogel A version of the paper can be found here. Want a summary of academic papers [...]
The Quantitative Value Investing Philosophy
Benjamin Graham, who first established the idea of purchasing stocks at a discount to their intrinsic value more than 80 years ago, is known today as the father of value investing. Since Graham’s time, academic research has shown that low price to fundamentals stocks have historically outperformed the market. In the investing world, Graham’s most famous student, Warren Buffett, has inspired legions of investors to adopt the value philosophy. Despite the widespread knowledge that value investing generates higher returns over the long-haul, value-based strategies continue to outperform the market. How is this possible? The answer relates to a fundamental truth: human beings behave irrationally. We are influenced by an evolutionary history that preserved traits fitted for keeping us alive in the jungle, not for optimizing our portfolio decision-making ability. While we will never eliminate our subconscious biases, we can minimize their effects by employing quantitative tools.