New research paper. Quantitative Value Investing in Europe: what works for achieving alpha

//New research paper. Quantitative Value Investing in Europe: what works for achieving alpha

 

We just published our brand new research paper called Quantitative Value Investing in Europe: what works for achieving alpha. And all subscribers to Quant Value receive the paper for free.

 

Few European investment studies

In comparison with the USA there have been relatively few studies conducted on what works in investing in the European stock markets.  With this paper we would like to make a contribution and examine what factors led to excess returns in the European markets over the 12-year period from 13 June 1999 to 13 June 2011.

The factors we tested were:

  • ·         Earnings yield,
  • ·         Free cash flow yield,
  • ·         Price-to-book
  • ·         Price-to-sales,
  • ·         Piotroski F-score
  • ·         Return on invested capital (ROIC)
  • ·         Return on assets (ROA)
  • ·         Net debt
  • ·         Relative strength / price index

 

Also tested five year averages

We not only tested the historical value of the factors, but where it made sense, we also tested the 5-year average to see if it is a better indicator to use to generate market out performance.

If we found a factor that showed strong out-performance we tested it together with other factors to see if two factors generate even more market out performance.

In addition, we also tested two investment strategies (explained in the paper), the MF and the ERP5 strategy, for their ability to outperform the market.

 

Astounding return of 1157.5%

What we found mostly confirmed what other research studies found, but a few results were really astounding.

What if we told you we found a simple two factor method you can use to select investments that led to a 23.5% per year compound return (market was 2.25%) over the 12 years we tested?  That is a total return of 1157.5% compared with the 30.54% the market returned!

 

Where can you get the study?

Available in online bookstores under the following number ISBN:978-1-4710-9219-0.

 

 

By | 2014-08-01T14:17:04+00:00 March 10th, 2012|