Investment Styles Fan longzhen
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
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
Ty rpes of investment styles Growth investing Primarily concerned with the earning component of the P/E ratio Look for high growth rate Value(non-growth)investing Primarily concerned with the price component 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
Types of investment styles • Growth investing – Primarily concerned with the earning component of the P/E ratio – Look for high growth rate • Value (non-growth) investing – Primarily concerned with the price component 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 indust · Growth: high eps growth high profitability; health technology Small capitalization
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(e.g. growth) behave quite differently from stocks in another category(e.g value Style anal ysis 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
Why style analysis? • Returns of stocks in one category (e.g. growth) behave quite differently from stocks in another category (e.g. 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