Fundamental Value Investors: Characteristics and Performance
I came across this interesting working paper from the SSRN. From the first paragraph:
This paper adds to the research on the issue of market efficiency. Rather than developing a quantitative trading rule that may or may not be implementable in the real world, or examining the returns of a broad cross-section of mutual fund managers who presumably have no skill on average, we analyze 2912 hedge fund manager investment recommendations posted to the invite-only internet community, Valueinvestorsclub.com from January 2000 to June 2008. The professionals involved with this exclusive site are paid for performance and must discover inefficiently priced assets and determine if the costs of pursuing them (noise-trader risk, liquidity risk, distress risk, macro risks, trading costs, and so forth) are worth the benefits. We answer a simple question: do the value investors in our sample have stock picking skills?
Tags: EMH, hedge funds, investing, value investing
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