Please use this identifier to cite or link to this item: http://hdl.handle.net/11718/19107
Title: Stock Picking - Insights from academic research
Authors: Mohanram, Partha S.
Keywords: Academic research;Stock picking
Issue Date: 22-Dec-2016
Publisher: Indian Institute of Management, Ahmedabad
Abstract: Despite the importance of the banking sector to the economy, prior valuation studies in accountinghave tended to generally discard bank stocks. We examine returns to a fundamental analysis based trading strategy for the U.S. bank stocks, using a bank fundamentals index (BSCORE) based on thirteen bank specific valuation signals. A long–short strategy based on BSCORE yields positive hedge returns for all but one year during the 1994–2013 period. Results are robust to partitions based on size, analyst following and exchange listing status, and persist after adjusting for known risk factors. Interestingly, we observe especially strong hedge returns during the 2007-2009 financial crisis. We further document a positive relation between BSCORE and future analystforecast surprises, earnings announcement period returns, and future performance-based delistings. Finally, the results are significantly enhanced if we combine the BSCORE strategy witha relative valuation strategy based on an intrinsic value approach. The results show that fundamental analysis can provide useful insights for analyzing banks, beyond the usual focus on metrics such as return on equity (ROE).
Description: The R & P seminar held at Wing 11 Committee Room, IIM Ahmedabad on December 22, 2016 by Prof. Partha S. Mohanram, Rotman School of Management, University of Toronto on "Stock Picking - Insights from academic research"
URI: http://hdl.handle.net/11718/19107
Appears in Collections:R & P Seminar

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