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Year 2013, Volume: 2 Issue: 4, 67 - 81, 01.12.2013

Eben Otuteye Mohammad Siddiquee

Abstract

References

  • Altman, E. I. (1968) Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy, The Journal of Finance,23, 189-209.
  • Athanassakos, G. (2009) Value versus Growth Stock Returns and the Value Premium: The Canadian Experience 1985-2005, Canadian Journal of Administrative Science, 26, 109-121.
  • Athanassakos, G. (2011) Do Value Investors Add Value?,The Journal of Investing, 20, 86-100.
  • Bauman, W. S., Conover, C. M., and Miller, R. E. (1998) Growth versus Value and Large-Cap versus Small-Cap Stocks in International Markets, Financial Analysts Journal, 54, 75-89.
  • Buffett, W. (1984) TheSuperinvestors of Graham-and-Doddsville, Hermes, 4-15.
  • Buffett, W. (1988) Chairman’s Letter to the Shareholders of Berkshire Hathaway, Available at http://www.berkshirehathaway.com/letters/1988.html (Accessed on December 31, 2012)
  • Capaul, C., Rowley, I., and Sharpe, W. F. (1993) International Value and Growth Stock Returns, Financial Analysts Journal, 49, 27-36.
  • Chan, L. K. C., Hamao, Y., and Lakonishok, J. (1991) Fundamentals and Stock Returns in Japan, The Journal of Finance, 46, 1739-1789.
  • Chan, L. K. C. and Lakonishok, J. (2004) Value and Growth Investing: Review and Update, Financial Analysts Journal, 60, 71-86.
  • Chan, L. K. C., Karceski, J., Lakonishok, J. (2000) New Paradigm or Same Old Hype in Equity Investing?,Financial Analysts Journal, 56, 23-36.
  • Chen, N., and Zhang, F. (1998) Risk and Return of Value Stocks, Journal of Business, 71, 5015
  • Dhatt, M. S., Kim, Y. H. and Mukherji, S. (1999) The Value Premium for Small-Capitalization Stocks, Financial Analysts Journal, 55, 60-68.
  • Fama, E. F., and French, K. R. (1992) The Cross-Section of Expected Stock Returns, The Journal of Finance, 47, 427-465.
  • Fama, E. F., and French, K. R. (1998) Value vs. Growth: The International Evidence, The Journal of Finance, 53, 1975-1999.
  • Fama, E. F., and French, K. R. (1996) Multifactor Explanations of Asset Pricing Anomalies, The Journal of Finance, 51, 55-84.
  • Graham, B. (1949) The Intelligent Investor, Revised Edition, HarperBusiness Essentials, New York.
  • Graham, B. (1976) A Conversation with Benjamin Graham, Financial Analysts Journal, 32, 20
  • Ibbotson, R. G. and Riepe, M. W. (1997) Growth vs. Value Investing: And the Winner Is..., Journal of Financial Planning, 10, 64-71.
  • Graham, B., and Dodd, D. (1934) Security Analysis, The Classic 1934 Edition, McGraw-Hill, New York.
  • Kwag, S. W. A., and Lee, S. W. (2006) Value Investing and the Business Cycle, Journal of Financial Planning, 19, 64-71.
  • La Porta, R., Lakonishok, J., Shleifer, A., and Vishny, R. (1997) Good News for Value Stocks: Further Evidence on Market Efficiency, The Journal of Finance, 52, 859-874.
  • Lakonishok, J., Shleifer, A., and Vishny, R. W. (1994) Contrarian Investment, Extrapolation, and Risk, The Journal of Finance, 49,1541-78.
  • Oppenheimer, H. R. (1984) A Test of Ben Graham's Stock Selection Criteria, Financial Analysts Journal, 40, 68-74.
  • Piotroski, J. D. (2000) Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers, Journal of Accounting Research, Supplement, 38, 1-41.
  • Rozeff, M. S., and Zaman, M. A. (1998) Overreaction and Insider Trading: Evidence from Growth and Value Portfolios, The Journal of Finance, 53, 701-716.
  • Standard & Poor’s (2011) S&P/TSX 60, Available at http://www.standardandpoors.com/indices/sp-tsx-60/en/us/?indexId=spcadntx--caduf--pca-l- (Accessed on December 31, 2012)

Examining The Performance of A Value Investing Heuristic: Evidence From The S&P/Tsx 60 From 2001-2011

Year 2013, Volume: 2 Issue: 4, 67 - 81, 01.12.2013

Eben Otuteye Mohammad Siddiquee

Abstract

Heuristics are useful practical tools for cutting through the complex confluence of uncertainty, limited information and bounded rationality. We develop a simple heuristic for making value investing decisions based on profitability, financial stability, susceptibility to bankruptcy, and margin of safety. As an empirical test, we apply this heuristic to the S&P/TSX 60 group of companies of the Toronto Stock Exchange. Analysis of the data shows that the portfolio that is picked from the S&P/TSX 60 by the heuristic has desirable characteristics required of value portfolios. Thus the heuristic can be viewed as a reliable set of value investing decision criteria.

References

  • Altman, E. I. (1968) Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy, The Journal of Finance,23, 189-209.
  • Athanassakos, G. (2009) Value versus Growth Stock Returns and the Value Premium: The Canadian Experience 1985-2005, Canadian Journal of Administrative Science, 26, 109-121.
  • Athanassakos, G. (2011) Do Value Investors Add Value?,The Journal of Investing, 20, 86-100.
  • Bauman, W. S., Conover, C. M., and Miller, R. E. (1998) Growth versus Value and Large-Cap versus Small-Cap Stocks in International Markets, Financial Analysts Journal, 54, 75-89.
  • Buffett, W. (1984) TheSuperinvestors of Graham-and-Doddsville, Hermes, 4-15.
  • Buffett, W. (1988) Chairman’s Letter to the Shareholders of Berkshire Hathaway, Available at http://www.berkshirehathaway.com/letters/1988.html (Accessed on December 31, 2012)
  • Capaul, C., Rowley, I., and Sharpe, W. F. (1993) International Value and Growth Stock Returns, Financial Analysts Journal, 49, 27-36.
  • Chan, L. K. C., Hamao, Y., and Lakonishok, J. (1991) Fundamentals and Stock Returns in Japan, The Journal of Finance, 46, 1739-1789.
  • Chan, L. K. C. and Lakonishok, J. (2004) Value and Growth Investing: Review and Update, Financial Analysts Journal, 60, 71-86.
  • Chan, L. K. C., Karceski, J., Lakonishok, J. (2000) New Paradigm or Same Old Hype in Equity Investing?,Financial Analysts Journal, 56, 23-36.
  • Chen, N., and Zhang, F. (1998) Risk and Return of Value Stocks, Journal of Business, 71, 5015
  • Dhatt, M. S., Kim, Y. H. and Mukherji, S. (1999) The Value Premium for Small-Capitalization Stocks, Financial Analysts Journal, 55, 60-68.
  • Fama, E. F., and French, K. R. (1992) The Cross-Section of Expected Stock Returns, The Journal of Finance, 47, 427-465.
  • Fama, E. F., and French, K. R. (1998) Value vs. Growth: The International Evidence, The Journal of Finance, 53, 1975-1999.
  • Fama, E. F., and French, K. R. (1996) Multifactor Explanations of Asset Pricing Anomalies, The Journal of Finance, 51, 55-84.
  • Graham, B. (1949) The Intelligent Investor, Revised Edition, HarperBusiness Essentials, New York.
  • Graham, B. (1976) A Conversation with Benjamin Graham, Financial Analysts Journal, 32, 20
  • Ibbotson, R. G. and Riepe, M. W. (1997) Growth vs. Value Investing: And the Winner Is..., Journal of Financial Planning, 10, 64-71.
  • Graham, B., and Dodd, D. (1934) Security Analysis, The Classic 1934 Edition, McGraw-Hill, New York.
  • Kwag, S. W. A., and Lee, S. W. (2006) Value Investing and the Business Cycle, Journal of Financial Planning, 19, 64-71.
  • La Porta, R., Lakonishok, J., Shleifer, A., and Vishny, R. (1997) Good News for Value Stocks: Further Evidence on Market Efficiency, The Journal of Finance, 52, 859-874.
  • Lakonishok, J., Shleifer, A., and Vishny, R. W. (1994) Contrarian Investment, Extrapolation, and Risk, The Journal of Finance, 49,1541-78.
  • Oppenheimer, H. R. (1984) A Test of Ben Graham's Stock Selection Criteria, Financial Analysts Journal, 40, 68-74.
  • Piotroski, J. D. (2000) Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers, Journal of Accounting Research, Supplement, 38, 1-41.
  • Rozeff, M. S., and Zaman, M. A. (1998) Overreaction and Insider Trading: Evidence from Growth and Value Portfolios, The Journal of Finance, 53, 701-716.
  • Standard & Poor’s (2011) S&P/TSX 60, Available at http://www.standardandpoors.com/indices/sp-tsx-60/en/us/?indexId=spcadntx--caduf--pca-l- (Accessed on December 31, 2012)
There are 26 citations in total.

Details

Journal Section Articles
Authors

Eben Otuteye This is me

Mohammad Siddiquee This is me

Publication Date December 1, 2013
Published in Issue Year 2013 Volume: 2 Issue: 4

Cite

APA Otuteye, E., & Siddiquee, M. (2013). Examining The Performance of A Value Investing Heuristic: Evidence From The S&P/Tsx 60 From 2001-2011. Journal of Business Economics and Finance, 2(4), 67-81.

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