The Case For Quantitative Value Investment ~ market folly

Friday, June 29, 2012

The Case For Quantitative Value Investment

Today's linkfest focused on investment process and we wanted to take that a step further with a long-form piece by Toby Carlisle of Eyquem Investment Management.  He's penned an interesting missive on the case for quantitative value investment.

In order to frame things, he's outlined a backdrop for his argument:

- Value stocks have beaten the market over the long term
- Most managers have failed to do the same
- The gap between the performance of active value managers and underlying performance of a value benchmark is likely due to systematic behavioral errors

Carlisle's argument for a quantitative approach centers on eliminating those behavioral errors.

In summary, Carlisle concludes that, "The quantitative method outpaces most active value managers, and with more consistency.  It does so because our behavioral errors are most pronounced when we reason intuitively.  We can reduce our errors by relying on statistical evidence, and limiting our discretion."

Embedded below is the case for quantitative value investment:

For similar reading, definitely check out the links we posted today on investment process.

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