In this paper, multifactor asset pricing models are used to assess and compare the performance - through the analysis of Jensen’s alpha - of three equity portfolios constructed according to the value ...investing strategies proposed by Joseph Piotroski, Benjamin Graham, and Joel Greenblatt. Three portfolios are constructed according to the methodologies developed by each author, using financial and accounting data from a sample of 598 stocks traded in the Brazilian stock exchange during the period Jan/2006-Dec/2019. Parameters of a five-factor model - an extended version of Carhart’s four factor model with the inclusion of an illiquidity factor - are estimated for each of the three portfolios. Regression results indicate that the three strategies have generated positive and statistically significant Jensen’s alpha in the five-factor model setting and other variations. However, the excess returns estimated according to different specifications vary substantially. The Capital Asset Pricing Model specification seems to underestimate Jensen’s alpha when compared to other specifications that provide higher explanatory power (adjusted R2).
•Four multicriteria methods for equity portfolio selection are compared.•All these methods can successfully be applied to value-momentum portfolio selection.•Combining value and momentum criteria ...into composite measures can benefit investors.•Investors can choose the method that best fits their portfolio-selection purposes.•The overall results are surprisingly robust to the firm size effect.
This paper compares the efficacy of four multicriteria decision-making (MCDM) methods in identifying the future best-performing stocks in two comprehensive samples of U.S. stocks. This is the first time that median-scaling (MS), the Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS), the Analytic Hierarchy Process (AHP), and the additive Data Envelopment Analysis (add.DEA) have been used to combine value and momentum indicators into a single efficiency score. The results show that the MCDM methods examined can successfully be applied to equity portfolio selection. As a robustness check, we repeat all the main sample tests for the sample of the largest-cap stocks included in the two biggest size quintiles (i.e., stocks above 40% NYSE market-cap breakpoint) and find that the overall results are surprisingly robust to size effect. However, the best-performing portfolios formed on the basis of different MCDM methods have remarkably different exposures to the style factors that are commonly used to explain the abnormal returns of active equity portfolios. As a practical implication of this study, investors following certain investing styles could take these different style exposures into account when choosing the MCDM criteria that best fit their portfolio-selection purposes.
Purpose: The aim of this study is to examine a framework of ESG elements and constituents to investigate socially responsible investment in a rising populist environment through a literature review.
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Theoretical framework: Socially responsible investment aims for long-term sustainability by combining financial return with positive change in the environment. The transformation of India’s populism towards environmental sustainability drives enterprises to incorporate ESG (environment, social, and governance) practices for the long term and craves to be an efficient tool for socially responsible investment.
Design/methodology/approach: This paper offers an overview of many reviews that are connected to the study's main terms while also discussing literature reviews as a research methodologyand all data in the study comes from these secondary sources.
Findings: As a result, this study finds out responsible investors' appetite for the identification of sustainability indicators and constituents and hunts for enterprise disclosures regarding their accomplishments towards ESG factors. The study focuses on developing an ESG constituent framework by integrating ESG compliances determined by a systematic review of literature, Global Reporting Initiative Standards, and other reporting standards.
Research, Practical & Social Implications:Although this study was carried with the intention of providing socially responsible investors with a useful tool, more extensive study is warranted before an empirical analysis of SRI firms' performance can be conducted, and the study could also benefit from being extended into an international context in order to better assess the performance of ESG firms.
Originality/Value:This study uses a five-year thematic analysis of S&P BSE 500 firms to determine which are most committed to corporate social responsibility.The study also helps investors by providing useful information about corporate ESG compliance.
This paper presents a quantitative overview of the research field of value creation for listed companies. The study is based on bibliometric analysis of articles published in the main database of the ...Web of Science between 1900 and 2018. In total, 213 articles were identified and quantitatively analyzed. The study shows that despite recent emergence and limited background regarding number of publications and citations, this topic is attracting interest as a scientific research field. It therefore has a promising future as a subject of research. The interest in this subject by countries, authors, and institutions is primarily from the People’s Republic of China, ahead of Western countries such as the United States and the UK. However, the fledgling status of this subject as a research topic and its recent growth suggest that researchers and institutions in many countries will focus their efforts on increasing and expanding research in this area.
We document that value-to-price, the ratio of Residual-Income-Model-based valuation to market price, subsumes the power of book-to-market ratio and many other value or quality measures in predicting ...stock returns. Long-short value-to-price portfolios hedge against momentum, revitalize the seemingly missing value premium over past decades, and generate significant returns after adjusting for common factors. The value-price-divergence (VPD) factor constructed from the average returns of these portfolios within small and big stocks is not spanned by these known factors. Max Sharpe ratio and constrained R-squared tests reveal that VPD is a better substitute for the traditional value factor and that a four-factor model using the VPD, market, momentum, and size factors outperforms most extant benchmarks in explaining the cross-section of expected equity returns, including value-to-price portfolios as test assets. The findings remain robust under alternative specifications of equity cost of capital.
This paper derives a new formula for the price-earnings growth (PEG) ratio, utilizing the insight from Mario Farina’s original equation and Peter Lynch’s assertion that for a stock to be ...fairly-valued, the PEG and earnings growth rate has to be the same. After deriving the new formula, I demonstrate how the new formula connects with the existing formulas and P/E Ratio. The new formula allows for more flexibility on growth rate assumptions for both earnings and price, is more intuitive, is easier to implement, and can be used to make predictions about future price and earnings growth with current price and earnings. The new formula addresses some of the concerns regarding the usefulness of the PEG Ratio.
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