Equity Factor Investing: Value Stocks

Fadi Zaher (fadi.zaher@lgim.com)
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Fadi Zaher: Index Solutions & Investment Specialists

Chapter 4 in Index Fund Management, 2019, pp 47-75 from Springer

Abstract: Abstract Value investing is a mix of science and art. It is one of the most traditional and familiar factor strategies among academics and practitioners. A value investor aims to buy bargains in the financial markets by focussing on understanding the underlying business behind the stock and deciding whether it is cheap, fairly valued or expensive. Benjamin Graham and Warren Buffet are among the many successful value investors and are a testimony to its success. This chapter offers an insight into rules-based value index strategies and how they are constructed. It further highlights the advantages and challenges that come with such rules-based approaches. Often, too much emphasis on low prices can mislead investors as a low price does not necessarily lead to a bargain or constitute the value characteristic in itself. It makes sense to consider attributes that can assist in understanding the financial health of companies in portfolios.

Date: 2019
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DOI: 10.1007/978-3-030-19400-0_4

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