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En magisk Formel?: Magic Formula på den europeiska marknaden.
Linköping University, Department of Management and Engineering, Business Administration. Linköping University, Faculty of Arts and Sciences.
Linköping University, Department of Management and Engineering, Business Administration. Linköping University, Faculty of Arts and Sciences.
2018 (Swedish)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesisAlternative title
A Magic Formula? : Magic Formula on the European Market. (English)
Abstract [sv]

Bakgrund: Den effektiva marknadshypotesen är ett vida accepterat begrepp inom den finansiella sfären men trots sin centrala roll har den fått motstå mycket kritik. Ett flertal anomalier har identifierats vilka är en kritik till marknadens effektivitet. I takt med anomaliernas framväxt har intresset för investeringsstrategier ökat. Går det att generera en överavkastning genom en förbestämd strategi där marknadens ineffektivitet utnyttjas? Vi finner det därför av intresse att studera Greenblatts (2010) Magic Formula och om det är möjligt att generera en överavkastning genom att tillämpa investeringsstrategin.

Syfte: Studien syfte är att analysera huruvida investeringsstrategin Magic Formula kan generera överavkastning jämfört med den globala aktiemarknaden samt om det föreligger några prestationsskillnader mellan de olika europeiska aktiemarknaderna. Vidare ämnar studien analysera hur ombalanseringsfrekvensen samt val av tidsperiod påverkar Magic Formula-portföljens avkastning.

Metod: För att genomföra studien har en kvantitativ strategi med en deduktiv ansats använts. Det har genomförts en tidsserieundersökning där portföljer har konstruerats och analyserats baserat på dess avkastning och risk som statistiskt säkerställts genom parvisa t-test samt regressioner. Studien har genomförts på den europeiska marknaden under tidsperioden 2007-04-01 till 2017-04-01.

Slutsats: Av 18 Magic Formula-portföljer presterar 14 portföljer sämre än jämförelseindex, sett till årliga medelavkastning samt total avkastning. Tre av de 14 portföljerna gav en signifikant lägre avkastning. Finanskrisen hade stor påverkan på resultaten. Exkluderas denna tidsperiod presterade endast 11 portföljer sämre, dock utan statistisk signifikans i resultaten. Studie har även funnit att en längre tidsperiod mellan ombalanseringarna tenderar att generera en högre avkastning.

Abstract [en]

Background: The efficient market hypothesis is a widely spread concept throughout the financial sphere, but despite of its central roll it have had to withstand a lot of criticism. Anomalies have been identified which are a criticism against the markets efficiency. The interest of investment strategies has grown as of the emergence of the anomalies. Is it possible to generate abnormal returns through a pre-determined strategy, where the market inefficiency is exploited? We therefore find it interesting to study Greenblatt’s (2010) Magic Formula and if it is possible to generate abnormal returns by implementing the investment strategy.

Purpose: The purpose of this study is to analyze whether the investment strategy Magic Formula can generate abnormal returns compared with the global stock market, and if it is possible to identify any performance differences between the European stock markets. Furthermore, the study aims to analyze how the re-balancing frequency and the time period effects returns from the Magic Formula.

Methodology: To implement the study we have used a quantitative strategy with a deductive design. We have implemented a time series analysis where portfolios have been constructed and analyzed based on its return and risk. The results have been statistically tested through pairwise t-tests and regressions. The study is conducted on the European market from 2007-04-01 to 2017-04-01.

Conclusion: 14 of the 18 Magic Formula portfolios have performed worse than the benchmark, according to annual average return and total return. Three of the 14 portfolios have had a significant lower return. The financial crisis affected the results greatly. If we excluded this time period only 11 portfolios performed worse, however without statistical support behind the results. Our results also suggest that a less frequent re-balancing of the portfolio generates higher return than a more frequent re-balancing.

Place, publisher, year, edition, pages
2018. , p. 117
Keywords [en]
Magic Formula, Investment Strategy, EMH, Value Investing
Keywords [sv]
Magic Formula, Investeringsstrategi, EMH, Värdeinvestering
National Category
Business Administration
Identifiers
URN: urn:nbn:se:liu:diva-148309ISRN: LIU-IEI-FIL-A--18/02794--SEOAI: oai:DiVA.org:liu-148309DiVA, id: diva2:1222828
Subject / course
Master Thesis in Business and Economics Programme (Business Administration)
Presentation
2018-06-04, T19, Linköpings universitet, 58183, Linköping, 15:45 (Swedish)
Supervisors
Examiners
Available from: 2018-09-04 Created: 2018-06-23 Last updated: 2018-09-04Bibliographically approved

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CiteExportLink to record
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