Value investing is a bumpy ride, but if you are a long-term investor, there are few better ways to invest.
Joel Greenblatt, 2009
In reply to the publication by Dr. Marc Faber of our study Value and the rest we were asked to document the returns to value investing in emerging Asia. In this contribution we present the results over the 1999-2012 period.
The methodology can be summarized as follows:
* companies need a public track-record of at least five years;
* annual stock portfolios are established at the end of July, i.e. taking into account a time lag of 7 months to account for delayed availability of the annual reports;
* companies with a market capitalization less than $250 million (in 2012 terms) are removed from the analysis;
* value and growth decile portfolios are established using the methodology of Chan and Lakonishok (2004) (refer to Value and the rest);
* value+ is an investment strategy where the value decile is purged from companies with a weak financial position (refer to Value and the rest);
* we include the following Asian countries in our dataset:
Singapore from 1987;
Hong Kong and South-Korea from 1989;
India, Indonesia, Malaysia, Philippines, Taiwan and Thailand from 1994;
Bangladesh, Sri Lanka and Vietnam from 2005.
* annual portfolio returns are measured in US dollar.
-Number of companies
TABLE I shows the number of companies for each country at the end of July over the 1999-2011 time period using the methodology explained above. There are only few companies in the database that meet the required criteria before the year 1999. In 1999 the number of companies taken into consideration is 289. This implies 29 companies per decile portfolio, an absolute minimum in order to achieve typical results. At the end of July 2011, in the twelve Asian countries there are 1743 appropriate companies that meet the requirements. Over the 1992-2011 period, the dataset contains 12,255 companies.
NUMBER OF COMPANIES PER COUNTRY