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The 'Valuation' area summarizes
papers implementing trading strategies that compare observed prices to measures
of fundamental value. Long positions are taken in securities that are
trading at low multiples of fundamental value and short positions are taken in
securities that are trading at high multiples of fundamental value.
- Lakonishok et al. (1994)
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Provides a good summary of basic valuation strategies, including
book-to-market and earnings-to-price ratios.
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- Frankel and Lee (1998)
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Extends the basic valuation strategies by (i) using the residual
income valuation model to combine information in book values and earnings,
(ii) incorporating information in analysts' earnings forecasts, and (iii)
adjusting for systematic biases in analysts' earnings forecasts.
- Piotroski (2000)
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[Click Here to
Download as PDF]
- Shows that we can dramatically improve on the returns to a simple high
book-to-market strategy by further screening on measures of financial health
and performance.
- Mohanram (2003)
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[Click Here to
Download as PDF]
- Shows that we can dramatically improve on the returns to a simple low
book-to-market strategy by further screening on measures of financial
health, stability and conservatism.
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