Enhancement of value strategies using the profitability premium
Master thesis
Permanent lenke
http://hdl.handle.net/11250/2480680Utgivelsesdato
2017Metadata
Vis full innførselSamlinger
- Master of Science [1703]
Sammendrag
The profitability premium can enhance value strategies. The anomaly is still
significant after adding a profitability- (RMW) and investment (CMA) factor to the
(Fama & French, 1993, 2015) three factor regression. A combination of the four
anomalies-- Book-to-Market Equity, Operating Cashflow, Gross Profit and Operating
Profit-- in a Mean Variance Portfolio achieves significant out of sample returns
compared to the market and other anomaly portfolios. This simple strategy realizes an
annualized Sharpe ratio of 1.30 between July 1966 to June 2016 and is even
significant after transaction costs. In addition, after implementing mutual fund
restrictions (no short selling, minimum market capitalization) it still earns a
significant monthly Alpha of 0.22% and is therefore suitable for retail- and
institutional investors.
Beskrivelse
Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2017