BUSI 4502 Lecture Notes - Lecture 6: Russell 3000 Index, Value Investing, Mathematical Finance
30 Aug 2018
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Document Summary
Value investing is increasingly being associated with quantitative investment strategies that use ratios of common fundamental metrics. Previous studies shows that these strategies are simple and effective way to achieve superior return for investors. Hence, this article is to determine if such strategies are accurate. The main purpose of this study is to demonstrate the formulaic value-investing strategies primarily identify stocks with temporarily inflated accounting numbers. This study is replicate and extending findings of asness et al. (2015). French"s website and the reporting period is from (cid:883)9(cid:884)(cid:888) to (cid:884)(cid:882)(cid:883)(cid:887). Fama-french value factor is based on two-by-three sort of us common stock available in crsp database. The authors added 4 additional factors: hmm big, lmm big, hmm small, lmm small to determine if return arise from long high stock or short low stock for large and small capitalization. The result does not support the claim that strategies with high book-to-market ratio valuation ratios provide healthy outperformance.
