Excess Returns: Episode 9: The Benefits of a Value Composite

Picking the right value metric can be one of the biggest challenges of quantitative value investing. Although the Price/Book is the most widely used value metric, its struggles in recent years and valid concerns that have been raised about its viability in a world dominated by intangible assets have led many to question whether it still works. But the other widely used value metrics also have their own problems. In this week’s episode, we discuss the benefits of using a value composite and how it can enhance the risk/return profile of a value strategy.

We talk about:

  • Why a value composite can help limit risk and make a value strategy easier to follow
  • Why all value metrics have their weaknesses
  • The process of constructing a value composite  

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Justin’s Value Composite article
What Works on Wall Street, Fourth Edition
The Danger of Overscrutinizing Out of Favor Investment Metrics
Our Interview with Corey Hoffstein, Hidden Risks in Investing with Corey Hoffstein