Portfolio Selection and Performance Evaluation Through Benjamin Graham’s Value Investing
Keywords:
Value Investing, The Margin Of Safety, Fundamental Analysis, Nifty Index, Portfolio, Dow Jones.
Abstract
Purpose: The objective of this study is to validate the value investing concerning filtering valued stock in the Indian stock market (Nifty 50) & United States (Dow Jones) during the period 2014 -20.
Design /Methodologies/Approach: We have selected the data of the National Stock Exchange and Dow Jones to apply the value investing technique for choosing the stocks and building a significant portfolio. Further, we compare the mean returns of B & H passive strategy. The empirical analysis includes the selected portfolio from Jan 2014 to May 2020.
Results & Practical Implication: The mean return of portfolio selected by Value investing outperform as comparative to passive strategy, i.e. Buy & Hold strategy. The successful application of value investing will encourage the practitioners & academicians of financial markets to research & explore further uses & practical impact of the present study.
JEL Classification Codes: F37.
References
Ahmed, I. (1997). Value investing on the Bombay (Mumbai) stock exchange-post sell off 1997. Available at SSRN 1307867.
Almeida, V. G., Oliveira, P. H., Botrel, P. C., & Martins, M. (2011). Teste da aplicação de critérios de análise fundamentalista às ações negociadas na Bovespa: 1997-2011. Anais do XIV SemeAD – Seminários em Administração, São Paulo, SP, Brazil. Retrieved from http://www.ead.fea.usp.br/semead/14semead/ resultado/trabalhosPDF/1066.pdf
Artuso, A. R., & Chaves Neto, A. (2010). O uso de quartis para a aplicação dos filtros de Graham na Bovespa (1998-2009). Revista Contabilidade & Finanças, 21(52), 1-20.
Balik, R., & Mehran, J. (2008). Benjamin Graham revisited. available at: www. academy financial. org/09Conference/09Proceedings/(5D)% 20Balik,% 20Mehran. pdf (accessed February 25, 2010).
Bildersee, J. S., Cheh, J. J., & Zutshi, A. (1993). The performance of Japanese common stocks in relation to their net current asset values. Japan and the World Economy, 5(3), 197-215.
Chang, D. (2011). Testing some of Benjamin Graham’s stock selection criteria: A case of the FTSE Bursa Malaysia EMAS Index from Year 2000 to 2009. Jurnal Manajemen Dan Kewirausahaan, 13(2), 99-106.
Cuthbertson, K., & Nitzsche, D. (2005). Quantitative financial economics: stocks, bonds, and foreign exchange. John Wiley & Sons.
Damodaran, A. (2006). Filosofias de investimento. Qualitymark Editora Ltda.
Dryden, M. M. (1970). A Statistical Study of U.K. Share Prices. Scottish Journal of Political Economy, 17(3), 369–389.
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417.
Fama, E. F., & Blume, M. E. (1966). Filter rules and stock market trading. The Journal of Business, 39(1), 226-241.
Graham, B. (1949). The Intelligent Investor, Harper Collins Publishers, New York, NY.
Graham, B., & Dodd, D. L. F. (1934). Security Analysis. New York, NY: McGraw-Hill Education.
Jensen, M. C. (1978). Some anomalous evidence regarding market efficiency. Journal of financial economics, 6(2/3), 95-101.
Klerck, W. G., & Maritz, A. C. (1997). A test of Graham's stock selection criteria on industrial shares traded on the JSE. Investment Analysts Journal, 26(45), 25-33.
Lakonishok, J., Shleifer, A., & Vishny, R. W. (1994). Contrarian investment, extrapolation, and risk. The journal of finance, 49(5), 1541-1578.
Lauterbach, B., & Vu, J. D. (1993). Ben Graham's net current asset value rule revisited: the size-adjusted returns. Quarterly Journal of Business and Economics, 82-108.
Mandelker, G., Clarke, J., & Jandik, T. (2001). Expert Financial Planning: Investment Strategies from Industry Leaders, Chapter: The Efficient Markets Hypothesis.
Oppenheimer, H. R. (1984). A test of Benjamin stock selection criteria, Financial Analyst Journal, 40, 68-74.
Oppenheimer, H. R. (1986). Ben Graham’s Net Current Asset Values: A Performance Update. Financial Analysts Journal, 42(6), 40-47.
Oppenheimer, H. R., & Schlarbaum, G. G. (1981). Investing with Ben Graham: an ex-ante test of the efficient markets hypothesis. Journal of Financial and Quantitative Analysis, 341-360.
Palazzo, V., Savoia, J. R., Securato, J. R., & Bergmann, D. R. (2018). Análise de carteiras de valor no mercado brasileiro. Revista Contabilidade & Finanças, 29(78), 452-468.
Quah, T. S. (2008). DJIA stock selection assisted by the neural network. Expert Systems with Applications, 35(1-2), 50-58.
Rea, J. B. (1977). Remembering Benjamin Graham—Teacher and Friend. The Journal of Portfolio Management, 3(4), 66-72.
Singh, J., & Kaur, K. (2014). Testing Ben Graham's stock selection criteria in the Indian stock market. Management and Labour Studies, 39(1), 43-62.
Testa, C. H. R. (2011). Aplicação da estratégia de investimento de Graham à BM&FBovespa para o pequeno investidor. SemeAD-Seminários em Administração, 14, 1-12.
Thawornwong, S., Enke, D., & Dagli, C. (2003). Neural networks as a decision-maker for stock trading: a technical analysis approach. International Journal of Smart Engineering System Design, 5(4), 313-325.
Vanstone, B., Finnie, G., & Tan, C. (2004). Applying fundamental analysis & neural network in the Australian stock market.
Vu, J. D. (1988). An Empirical analysis of Ben Graham's net current asset value rule. Financial Review, 23(2), 215-225.
Xiao, Y., & Arnold, G. C. (2008). Testing Benjamin Graham’s net current asset value strategy in London. The Journal of Investing, 17(4), 11-19.
Almeida, V. G., Oliveira, P. H., Botrel, P. C., & Martins, M. (2011). Teste da aplicação de critérios de análise fundamentalista às ações negociadas na Bovespa: 1997-2011. Anais do XIV SemeAD – Seminários em Administração, São Paulo, SP, Brazil. Retrieved from http://www.ead.fea.usp.br/semead/14semead/ resultado/trabalhosPDF/1066.pdf
Artuso, A. R., & Chaves Neto, A. (2010). O uso de quartis para a aplicação dos filtros de Graham na Bovespa (1998-2009). Revista Contabilidade & Finanças, 21(52), 1-20.
Balik, R., & Mehran, J. (2008). Benjamin Graham revisited. available at: www. academy financial. org/09Conference/09Proceedings/(5D)% 20Balik,% 20Mehran. pdf (accessed February 25, 2010).
Bildersee, J. S., Cheh, J. J., & Zutshi, A. (1993). The performance of Japanese common stocks in relation to their net current asset values. Japan and the World Economy, 5(3), 197-215.
Chang, D. (2011). Testing some of Benjamin Graham’s stock selection criteria: A case of the FTSE Bursa Malaysia EMAS Index from Year 2000 to 2009. Jurnal Manajemen Dan Kewirausahaan, 13(2), 99-106.
Cuthbertson, K., & Nitzsche, D. (2005). Quantitative financial economics: stocks, bonds, and foreign exchange. John Wiley & Sons.
Damodaran, A. (2006). Filosofias de investimento. Qualitymark Editora Ltda.
Dryden, M. M. (1970). A Statistical Study of U.K. Share Prices. Scottish Journal of Political Economy, 17(3), 369–389.
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417.
Fama, E. F., & Blume, M. E. (1966). Filter rules and stock market trading. The Journal of Business, 39(1), 226-241.
Graham, B. (1949). The Intelligent Investor, Harper Collins Publishers, New York, NY.
Graham, B., & Dodd, D. L. F. (1934). Security Analysis. New York, NY: McGraw-Hill Education.
Jensen, M. C. (1978). Some anomalous evidence regarding market efficiency. Journal of financial economics, 6(2/3), 95-101.
Klerck, W. G., & Maritz, A. C. (1997). A test of Graham's stock selection criteria on industrial shares traded on the JSE. Investment Analysts Journal, 26(45), 25-33.
Lakonishok, J., Shleifer, A., & Vishny, R. W. (1994). Contrarian investment, extrapolation, and risk. The journal of finance, 49(5), 1541-1578.
Lauterbach, B., & Vu, J. D. (1993). Ben Graham's net current asset value rule revisited: the size-adjusted returns. Quarterly Journal of Business and Economics, 82-108.
Mandelker, G., Clarke, J., & Jandik, T. (2001). Expert Financial Planning: Investment Strategies from Industry Leaders, Chapter: The Efficient Markets Hypothesis.
Oppenheimer, H. R. (1984). A test of Benjamin stock selection criteria, Financial Analyst Journal, 40, 68-74.
Oppenheimer, H. R. (1986). Ben Graham’s Net Current Asset Values: A Performance Update. Financial Analysts Journal, 42(6), 40-47.
Oppenheimer, H. R., & Schlarbaum, G. G. (1981). Investing with Ben Graham: an ex-ante test of the efficient markets hypothesis. Journal of Financial and Quantitative Analysis, 341-360.
Palazzo, V., Savoia, J. R., Securato, J. R., & Bergmann, D. R. (2018). Análise de carteiras de valor no mercado brasileiro. Revista Contabilidade & Finanças, 29(78), 452-468.
Quah, T. S. (2008). DJIA stock selection assisted by the neural network. Expert Systems with Applications, 35(1-2), 50-58.
Rea, J. B. (1977). Remembering Benjamin Graham—Teacher and Friend. The Journal of Portfolio Management, 3(4), 66-72.
Singh, J., & Kaur, K. (2014). Testing Ben Graham's stock selection criteria in the Indian stock market. Management and Labour Studies, 39(1), 43-62.
Testa, C. H. R. (2011). Aplicação da estratégia de investimento de Graham à BM&FBovespa para o pequeno investidor. SemeAD-Seminários em Administração, 14, 1-12.
Thawornwong, S., Enke, D., & Dagli, C. (2003). Neural networks as a decision-maker for stock trading: a technical analysis approach. International Journal of Smart Engineering System Design, 5(4), 313-325.
Vanstone, B., Finnie, G., & Tan, C. (2004). Applying fundamental analysis & neural network in the Australian stock market.
Vu, J. D. (1988). An Empirical analysis of Ben Graham's net current asset value rule. Financial Review, 23(2), 215-225.
Xiao, Y., & Arnold, G. C. (2008). Testing Benjamin Graham’s net current asset value strategy in London. The Journal of Investing, 17(4), 11-19.
Published
2020-08-03
How to Cite
Srivastava, V. K., & Kulshrestha, N. (2020). Portfolio Selection and Performance Evaluation Through Benjamin Graham’s Value Investing. Indian Journal of Finance and Banking, 4(2), 11-16. https://doi.org/10.46281/ijfb.v4i2.688
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2020 Vinay K. Srivastava, Nitin Kulshrestha
This work is licensed under a Creative Commons Attribution 4.0 International License.
