Debt Capacity and Value Investing

Abstract

Purpose: This test one of the well know methods proposed by Benjamin Graham and David Doss in 1934 -Debt Capacity Value Investing method. This method is used in a simple construct to test if the investor with no formal prior knowledge of financial engineering can benefit from this method.

Design: We test sixty portfolios starting from 2011 to 2015 on a yearly basis. The sample is taken yearly with data from 2006 to 2015. The Holding period under test is from eight years to four years.

Finding: The results show extraordinary results from ordinary methodology. The Value stock portfolio is found to give as much as 27% returns.

Originality/Value: The research in the area of the value investing has broadly used either the Fama-French factor models or the net current assets. However the research or testing of the value investing other methods has been largely ignored. The present paper fills this gap of testing the method by value investing first guru “ Benjamin Graham”.

Paper Type: Empirical Research Paper.