AdvancedMAD Academy0:46Quant

Cheap for a Reason, or Cheap by Mistake

The value premium is one of the most studied results in finance, and it has spent long stretches not working at all.

0:46 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00Buying cheap stocks has beaten the market over long periods. Not all of them.
  2. 0:05The two explanations. Either cheap stocks are riskier and paid for it, or investors simply overreact.
  3. 0:14The drought. Value underperformed for well over a decade. Long enough to end most careers.
  4. 0:24The measurement problem. Book value misses intangibles, so asset-light firms look expensive by construction.
  5. 0:33The practical requirement. A horizon long enough to sit through a decade of being wrong.
  6. 0:41Know which metric you are using, and how long you can wait.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Cheap for a Reason, or Cheap by Mistake — MAD Academy Training Video · MadStockAlerts