文档介绍：Investment Styles
Fan Longzhen
Introduction
• Overview of investment styles;
• Empirical evidence on returns of small capitalization firms
and value stocks;
• How to identify investment styles of a mutual fund
– Characteristic-based style analysis
– Return-based style analysis
• Style benchmarks
• Why value stock outperform growth stocks;
• Earning and price momentum
Types of investment styles
• Growth investing
– Primarily concerned with the ponent of the
P/E ratio
– Look for high growth rate
• Value (non-growth) investing
– Primarily concerned with the ponent of the
P/E ratio
– Look for cheap stocks
• Small cap investing (as opposed to large cap)
– Looking for neglected stocks
– Undervalued relative to large cap equities
Investment styles
•Value:
– low price/book; low P/E; utilities industry
• Growth: high EPS Growth
– high profitability; health & technology
• Small capitalization
Why style analysis?
• Returns of stocks in one category (. growth)
behave quite differently from stocks in another
category (. value)
• Style analysis facilities
– Monitoring style characteristics;
– Diversification and risk control;
– Performance valuation
• In September 2001, a total of 3271 domestic
equity managers participated in the survey
– 962 identify themselves as value managers;
– 1124 identify themselves as growth managers.
Returns of small capitalization stocks
• Fama and French (1992)
– Rank the stocks into ten deciles based on market
capitalization every year;
– Compute the average 1-year holding period return after
portfolio formation.
– Found small stocks have higher returns than big stocks
(1963-1991)
– Fama and French do a secondary sort by beta within
each size decile, and find that beta can not explain the
returns.
Return of high/low book-to-market stocks
• Fama and French (1992, Journal of finance)
– Rank stocks into ten deciles based on book-to-
market ratio ev