Tag: Chart

Factor investing hasn’t got of to a start in India even though most people talk about factors. Value based on how you derive it is a factor that could be used as a way to rank stocks and buy the cheapest.

The following chart is from US where the Value factor primarily defined by buying stocks that are cheap as measured by Forward Price by Earnings has been under-performing the market for close a decade now. Yet, its the one that is the most popular. Maybe fund managers are hoping that at some point it shall mean revert and start to be great again.

The fact that interests me most about factor investing in India is the virgin nature of the concept. Most fund managers are happy to chase stories even though reading books on behavioral finance teaches us as to how easy its to get misled through stories weaved by crafty promoters.

Factors on the other hand being totally quantitative, its easier to overcome our challenges for the data stares right back at us. The best book to read on building such quantitative based strategies would be What Works on Wall Street by James O’Shaughnessy

Which of the above factors do you think makes logical sense and which don’t?