Date of Award

1-1-2001

Thesis Type

Masters

Document Type

Thesis

Divisions

Faculty of Business and Economics

Department

-

Institution

Universiti Malaya

Abstract

A value strategist is a fund manager who seeks to buy stocks that are a discount to their fair value and sell them· in excess of that value. Value strategists see value where many other market participants do not. Value investing strategy was popularized by Benjamin Graham and later, his protégé Warren Buffett. Graham, a finance professor, taught security analysis at Columbia University and retired a millionaire as a result of his investments in the NYSE. Together with David Dodd, he laid out the analytical framework for investing in stocks that are cheap on the basis of their underlying assets. His advice is to buy stocks when they are undervalued and sell them when they are overpriced. Buffett, his student, is history's greatest investor - whose instinct for finding value has turned a 1956 investment of US$10,000 into US$250 million today - after taxes! He guided his investment company, Berkshire Hathaway from US$12 in 1967 to US$80,900 per share in 1999. He is listed as the third richest person in the world with assets worth US$29 billion, according to Forbes magazine. Buffett is very much aware of the extent to which his investment record constitutes a challenge to the efficient market hypothesis (EMH). On the other hand, the EMH states that stock prices adjust rapidly to the arrival of new information and, therefore, they reflect all information about the stock. In principle, says the EMH, no one can systematically beat the stock market. Efforts by analysts and investors to analyze public information using fundamental analysis will not yield consistently superior returns. Like most hypotheses in finance and economics, the overall evidence, so far, from extensive academic research on capital market efficiency is best described as mixed since some studies support the hypothesis and some do not - resulting in some anomalies. The implications of these diverse results have significant real world implications for investors and fund managers.

Initial

snms

Additional Information

Dissertation (M.A) -- Faculty of Business and Economics, Universiti Malaya, 2001.

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