Value investing; A quest for alpha in the Nordic region - Back-testing the strategies developed by Joel Greenblatt and Joseph Piotroski

University essay from Handelshögskolan i Stockholm/Institutionen för redovisning och finansiering

Abstract: This thesis evaluates the performance of the Magic formula and F-score. The investment strategies are applied to the entire Nordic region over the period of 2005-2015 and the returns evaluated using the CAPM and Fama & French's three-factor model. The success of each investment strategy is found to be dependent on the measure of risk, and while the Magic formula manages to generate excess return, the F-score produces a higher alpha when tested using the CAPM and Fama & French's three-factor model. Furthermore, the estimation of the SMB and HML factor portfolios suggests that over the course of 2005-2015 the Nordic region appears to have a positive size premium and a negative value premium.

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