Examining the Performance of a Value Investing Heuristic: Evidence from the S&P/TSX 60 from 2001-2011

Otuteye, Eben; Siddiquee, Mohammad

doi:10.2139/ssrn.2252983

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Examining the Performance of a Value Investing Heuristic: Evidence from the S&P/TSX 60 from 2001-2011

Otuteye, E., & Siddiquee, M. (2013). Examining The Performance of a Value Investing Heuristic: Evidence From The S&P/TSX 60 From 2001-2011. Journal of Business Economics & Finance, 2(4), 67-81

14 Pages Posted: 17 Apr 2013 Last revised: 17 Oct 2017

See all articles by Eben Otuteye

Eben Otuteye

Faculty of Management, University of New Brunswick

Mohammad Siddiquee

Department of Business Administration and Tourism and Hospitality Management, Mount Saint Vincent University

Date Written: May 17, 2012

Abstract

Heuristics are useful practical tools for cutting through the complex confluence of uncertainty, limited information and bounded rationality. We develop a simple heuristic for making value investing decisions based on profitability, financial stability, susceptibility to bankruptcy, and margin of safety. As an empirical test, we apply this heuristic to the S&P/TSX 60 group of companies of the Toronto Stock Exchange. Analysis of the data shows that the portfolio that is picked from the S&P/TSX 60 by the heuristic has desirable characteristics required of value portfolios. Thus the heuristic can be viewed as a reliable set of value investing decision criteria.

Keywords: Value investing, Heuristic, Value premium, Skewness

JEL Classification: G11

Suggested Citation: Suggested Citation

Otuteye, Eben and Siddiquee, Mohammad, Examining the Performance of a Value Investing Heuristic: Evidence from the S&P/TSX 60 from 2001-2011 (May 17, 2012). Otuteye, E., & Siddiquee, M. (2013). Examining The Performance of a Value Investing Heuristic: Evidence From The S&P/TSX 60 From 2001-2011. Journal of Business Economics & Finance, 2(4), 67-81, Available at SSRN: https://ssrn.com/abstract=2252983 or http://dx.doi.org/10.2139/ssrn.2252983