Abstract: There is growing interest in the use of quantitative stock screening and selection techniques in the investment industry. Such approaches can contribute to a better-disciplined investment process, and can complement bottom-up fundamental active stock picking decisions under resource constraints. A by-product of such a framework allows for backtesting alternative style investment strategies under various market regimes. There is perhaps no holy grail for optimal style combinations, which are constantly evolving, but structured filtering can certainly complement fundamental alpha generation and mitigate incomplete research coverage in company selection. To this end we present here a quantitative toolkit for screening and backtesting user-defined fundamental-based style strategies for any given equity universe (market or sector level). The approach is applicable for long-only as well as long-short investing and can be of use to active fund managers, enhanced indexers and strategists.

Abstract: We examine novel data on the detailed investment decisions of professional value investors. We find evidence that value investors are not easily defined: they exploit traditional tangible asset valuation discrepancies such as buying high book-to-market stocks, but spend more time analyzing intrinsic value, growth measures, and special situation investments. We also test whether fundamental value investors outperform the market in our sample (January 2000 to June 2008). Analyzing buy-and-hold abnormal returns and calendar-time portfolio regressions, we conclude that value investors have stock picking skills.