Are value returns higher when the value spread is large? If so, what happens at these times? Do value returns reflect rational compensation for risk, behavioral over-reaction, or pure noise in prices? These are the questions Cliff Asness, John Liew, Lasse Heje Pedersen, and Ashwin Thapar set out to answer in a new research paper on the topic of value investing. Titled, Deep Value the paper provides new evidence on competing theories for the value premium in several assets. The researchers define “deep value” as “episodes where the valuation spread between cheap and expensive securities is wide relative to its history”. One of…
Over-Extrapolation Of Past Returns Not Noise Is Responsible For Cheap Stocks
Sign up now and get our in-depth FREE e-books on famous investors like Klarman, Dalio, Schloss, Munger Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors. Rupert owns shares in Berkshire Hathaway. Rupert holds qualifications from the Chartered Institute For Securities & Investment and the CFA Society of the UK. Rupert covers everything value investing for ValueWalk