Testing Ben Graham’s Stock Selection Criteria in Indian Stock Market

2014 ◽  
Vol 39 (1) ◽  
pp. 43-62
Author(s):  
Jaspal Singh ◽  
Kiranpreet Kaur
Keyword(s):  
Selection Criteria ◽  
Stock Exchange ◽  
Operating Efficiency ◽  
Capital Asset Pricing ◽  
Stock Selection ◽  
Excess Returns ◽  
Asset Value ◽  
Current Asset ◽  
Minimum Number ◽  
Indian Stock Market

Using the data on stocks listed on Bombay Stock Exchange for the period spanning from 1996 to 2010, the present study intends to examine the profitability of stock selection criteria of Benjamin Graham in Indian capital market. The different risk–reward combinations of the criteria and the minimum number of principles to be followed by a stock have been examined using one sample T-test, Sharpe ratio and capital asset pricing model (CAPM). The results make it evident that all the risk-reward combinations can be used safely by investors in order to extract excess returns except the combination of discount to net current asset value (NCAV) and current ratio and the combination of high dividend yield and low leverage. Such stocks have lesser chances of growth in future and excessively blocked inventory reduces the operating efficiency of the business. Furthermore the stocks meeting any four rules of the criteria can yield excess returns to investors if such stocks are held for the period of 24 months.

Examining the relevance of Graham's criteria in Indian stock market

2014 ◽  
Vol 11 (3) ◽  
pp. 273-289 ◽  
Author(s):  
Jaspal Singh ◽  
Kiranpreet Kaur
Keyword(s):  
Regression Analysis ◽  
Stock Market ◽  
Selection Criteria ◽  
Stock Selection ◽  
Excess Returns ◽  
Content Type ◽  
Value Investing ◽  
Asset Value ◽  
Current Asset ◽  
Indian Stock Market

Purpose – The purpose of this paper is to examine the applicability of stock selection criteria of Benjamin Graham in Indian capital market to determine which rules specifically can help the investors to augment their return on investment. Design/methodology/approach – The independent sample t-test has been employed to examine the stock return differences among the companies which fulfill maximum number of the criteria and the companies fulfilling minimal number. The significance of the excess returns yielded by the criteria is assessed through one sample t-statistics. Further, the applicability of each and every criterion is examined using pooled OLS regression analysis. Findings – The mean market adjusted returns of the companies which fulfill maximum number of the criteria are significantly different from the companies which fulfill minimal number. The companies those are able to fulfill at least any five criteria, yield excess returns to the investors. However, regression analysis makes it evident that all the criteria are not applicable in present economic environment. Research limitations/implications – The study recommends that an investor should give due importance to variables mainly high earnings yield, discount to tangible book value and net current asset value, lower leverage and stability in earnings in order to screen value maximizing securities. Originality/value – This paper extends discussion on application of Graham's stock selection criteria in Indian stock market. The study also enriches the literature on value investing strategies by extending discussion on reasons for the applicability/inapplicability of the Graham's stock selection criteria.

Application of CAPM in the Indian Stock Market A Comprehensive Reassessment

2005 ◽  
Vol 1 (2) ◽  
pp. 1-12 ◽  
Author(s):  
Raj S. Dhankar ◽  
Rohini Singh
Keyword(s):  
Stock Market ◽  
Capital Market ◽  
Stock Exchange ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
Conflicting Evidence ◽  
Empirical Tests ◽  
Indian Stock Market

There is conflicting evidence on the applicability of Capital Asset Pricing Model in the Indian stock market. Data for 158 stocks listed on the Bombay Stock Exchange was analyzed using a number of tests from 1991–2002, the period which roughly coincides with the period after liberalization and initiation of capital market reforms. Taken in aggregate the various empirical tests show that CAPM is not valid for the Indian stock market for the period studied.

Firm Attributes, Corporate Fundamentals and Investment Strategies: An Empirical Study for Indian Stock Market

2020 ◽  
Vol 45 (3) ◽  
pp. 366-387
Author(s):  
Tarunika Jain Agrawal ◽  
Sanjay Sehgal ◽  
Vibhuti Vasishth
Keyword(s):  
Stock Exchange ◽  
Operating Efficiency ◽  
Investment Strategies ◽  
Market Anomalies ◽  
Price Momentum ◽  
Performance Benchmarks ◽  
Asset Growth ◽  
Using Data ◽  
Indian Stock Market ◽  
Firm Attributes

We combine corporate attributes and fundamental factors for evolving different investment strategies using data from 200 companies listed in the National Stock Exchange (NSE) from 2005 to 2018. The results indicate the existence of equity market anomalies based on size, volume, earnings, cash flow variability, asset growth, price momentum, price-to-book ratio and profitability. The performance of trading strategies is sensitive to portfolio construction procedure, that is, forming 5/10/20 portfolios. Bivariate strategies generally perform better than univariate strategies in the Indian context. On an overall basis, the size-based strategy performs best with a mean excess return of 3.63 per cent per month. We further find that corporate fundamentals such as profitability, operating efficiency, liquidity, solvency, innovation and entry barriers help in filtering poor future performers that may have been recommended by attributes-based strategy. Our filtered portfolios based on firm attributes and corporate fundamentals outperform unfiltered portfolios, and their returns are not explained by multi-factor performance benchmarks.

scholarly journals The effects of selected trading strategies on the value of closed-end investment trusts: A test of the efficiency of the Johannesburg Stock Exchange

1993 ◽  
Vol 24 (3) ◽  
pp. 77-82
Author(s):  
Narendra Bhana
Keyword(s):  
Standard Deviation ◽  
Stock Exchange ◽  
Trading Strategies ◽  
Excess Returns ◽  
Investment Funds ◽  
Trading Rules ◽  
Johannesburg Stock Exchange ◽  
Market Portfolio ◽  
Asset Value ◽  
Net Asset Value

Closed-end investment funds listed on the Johannesburg Stock Exchange invariably trade at discounts from their net asset value. The purpose of this article is to test a series of trading rules to determine whether an investor can capitalize on these discounts to earn excess returns. The buy-and-sell points strategy produced returns significantly in excess of these obtainable by holding the market portfolio or by following a buy-and-hold strategy. Using standard deviation of return as a proxy for risk, the results fail to confirm that an investor had to accept significantly more risk to earn a larger return. However, there is no assurance that the same strategies will produce excess returns in the future. The trading strategies tested over the 1979-88 period may require adjustments in today's market.

Risk-Managed Momentum: An Evidence from Indian Stock Market

2021 ◽  
pp. 231971452110230
Author(s):  
Simarjeet Singh ◽  
Nidhi Walia ◽  
Pradiptarathi Panda ◽  
Sanjay Gupta
Keyword(s):  
Stock Market ◽  
Asset Management ◽  
Stock Exchange ◽  
Sharpe Ratio ◽  
Relative Momentum ◽  
Extended Time ◽  
Momentum Strategies ◽  
Momentum Profits ◽  
Indian Stock Market ◽  
Time Frames

Relative momentum strategies yield large and substantial profits in the Indian Stock Market. Nevertheless, relative momentum profits are negatively skewed and prone to occasional severe losses. By taking into consideration 450 stocks listed on the Bombay Stock Exchange, the present study predicts the timing of these huge momentum losses and proposes a simple risk-managed momentum approach to avoid these losses. The proposed risk-managed momentum approach not only doubles the adjusted Sharpe ratio but also results in significant improvements in downside risks. In contrast to relative momentum payoffs, risk-managed momentum payoffs remain substantial even in extended time frames. The study’s findings are particularly relevant for asset management companies, fund houses and financial academicians working in the area of asset anomalies.

Disposition effect at the market level: evidence from Indian stock market

2019 ◽  
Vol 12 (2) ◽  
pp. 69-82
Author(s):  
Sravani Bharandev ◽  
Sapar Narayan Rao
Keyword(s):  
Trading Volume ◽  
Stock Exchange ◽  
Reference Points ◽  
Disposition Effect ◽  
Content Type ◽  
Ex Post ◽  
Abnormal Trading Volume ◽  
The Difference ◽  
Trading Volumes ◽  
Indian Stock Market

Purpose The purpose of this paper is to test the disposition effect at market level and propose an appropriate reference point for testing disposition at market level. Design/methodology/approach This is an empirical study conducted on 500 index stocks of NSE500 (National Stock Exchange). Winning and losing days for each stock are calculated using 52-week high and low prices as reference points. To test disposition effect, abnormal trading volumes of stocks are regressed on their percentage of winning (losing) days. Further using ANOVA, the difference between mean of percentage of winning (losing) days of high abnormal trading volume deciles and low abnormal trading volume deciles is tested. Findings Results show that a stock’s abnormal trading volume is positively influenced by the percentage of winning days whereas percentage of losing days show no such effect. Findings are consistent even after controlling for volatility and liquidity. ANOVA results show the presence of high percentage of winning days in higher deciles of abnormal trading volumes and no such pattern in case of losing days confirms the presence of disposition effect. Further an ex post analysis indicates that disposition prone investors accumulate losses. Originality/value This is the first study, which proposes the use of 52-week high and low prices as reference points to test the market-level disposition effect. Findings of this study enhance the limited literature available on disposition effect in emerging markets by providing evidence from Indian stock markets.

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