Analysis of value portfolios in the Brazilian market

Authors

  • Vitor Palazzo Fundação Instituto de Administração, Laboratório de Finanças https://orcid.org/0000-0002-3829-197X
  • José R. F. Savoia Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade, Departamento de Administração
  • José Roberto Securato Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade, Departamento de Administração
  • Daniel Reed Bergmann Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade, Departamento de Administração

DOI:

https://doi.org/10.1590/rc&f.v29i78.150635

Keywords:

value investing, investments, stocks, investment philosophies, Brazilian market.

Abstract

This paper tested a value investing strategy for the Brazilian market, selecting stocks based on the criteria suggested by Graham (2007) so that lower quality companies with potential risks not captured by the traditional risk models were eliminated. Five hundred thirty-two stocks were analyzed in the period from May 2005 to April 2015 and, after applying the Graham selection filters, portfolios with 10-year maturity were obtained. After simulating the portfolios’ performances over the analysis period and measuring the Sharpe ratios, it was possible to verify: (i) the validity of the Graham model for selecting stocks in the Brazilian market, (ii) tiering of the Graham filters according to their relevance, and (iii) the ideal composition for a value investing portfolio in the Brazilian market for the period analyzed. The portfolios obtained were able to offer higher risk adjusted returns than the Bovespa Index in the period, as well as lower risk metrics. The results confirmed the validity of the value investing strategy in the domestic market.

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Published

2018-09-27

Issue

Vol. 29 No. 78 (2018)

Section

Original Articles

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How to Cite

Palazzo, V., Savoia, J. R. F., Securato, J. R., & Bergmann, D. R. (2018). Analysis of value portfolios in the Brazilian market. Revista Contabilidade & Finanças, 29(78), 452-468. https://doi.org/10.1590/rc&f.v29i78.150635