Deep Value Investing and Unexplained Returns

41 Pages Posted: 2 Oct 2011 Last revised: 5 Jan 2012

Jeffrey Oxman

University of St. Thomas

Sunil Mohanty

University of St. Thomas - Opus College of Business

Tobias Eric Carlisle

Carbon Beach Asset Management LLC

Date Written: September 16, 2011

Abstract

The strategy of buying and holding “net nets” has been advocated by deep value investors for decades, but systematic studies of the returns to such a strategy are few. We detail the returns generated from a net nets strategy implemented from 1984 - 2008, and then attempt to explain the excess returns (alpha) generated by the net nets strategy. We find that monthly returns amount to 2.55%, and excess returns using a simple market model amount to 1.66%. After controlling for a variety of risk factors and firm characteristics, and imposing several filters, we find a remaining significant excess return.

Keywords: deep value, net nets, excess returns

JEL Classification: G11, G12

Suggested Citation

Oxman, Jeffrey and Mohanty, Sunil and Carlisle, Tobias Eric, Deep Value Investing and Unexplained Returns (September 16, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1928694 or http://dx.doi.org/10.2139/ssrn.1928694

Jeffrey Oxman (Contact Author)

University of St. Thomas ( email )

1000 LaSalle Ave.
Minneapolis, MN 55403
United States

Sunil K. Mohanty

University of St. Thomas - Opus College of Business ( email )

1000 LaSalle Avenue
TMH 443
Minneapolis, MN 55403
United States

Tobias Eric Carlisle

Carbon Beach Asset Management LLC ( email )

201 Ocean Avenue
Suite 1702P
Santa Monica, CA CA 90402
United States
+16465358629 (Phone)

HOME PAGE: http://www.carbonbeacham.com

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