Fundamental Portfolio Outperforms the Market Portfolio

Hayden Brown

Papers from arXiv.org

Abstract: There is substantial empirical evidence showing the fundamental portfolio outperforming the market portfolio. Here a theoretical foundation is laid that supports this empirical research. Assuming stock prices revert around fundamental prices with sufficient strength and symmetry, the fundamental portfolio outperforms the market portfolio in expectation. If reversion toward the fundamental price is not sufficiently strong, then the fundamental portfolio underperforms the market portfolio in expectation.

Date: 2022-05
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2205.12242

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