Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 8, 2022 erstellt
Beschreibung:
The value investment strategy has been in the limelight since the 1930s but has faced challenges recently. We find that, while the last two decades have seen vanishing profits from value investing in the U.S., the value strategy remains successful in China’s A-share market, the second-largest stock market in the world. The factor combining various valuation and profitability metrics generates highly positive returns over time in China. The differing performance of value investing in the two markets is partly driven by the short leg of the relative strategy and poses an investment dilemma: Short selling stocks of growth firms contributes to the value-investing profit in China but generates paper money only, while in the U.S., short sales of such stocks are doable but produce no alpha. To circumvent this difficulty, we propose a new value investing mindset to buy value firms only in both markets. Due to the extremely low return correlation of the two country portfolios, such an international strategy achieves a high Sharpe ratio and delivers significantly positive risk-adjusted returns