Can We Beat The Dow ? The Mirage Of Growth Strategies

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Can We Beat The Dow ? The Mirage Of Growth Strategies

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Leonardo Becchetti
Giancarlo Marini

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Abstract

This paper implements the traditional contrarian strategy literature by testing the significance of value and growth portfolios formed on deviations between observed and discounted cash flow fundamental stock values. Our findings on the 30 stocks of the Dow show that growth portfolios significantly outperform buy and hold strategies on the Index. Arbitrage opportunities, however, disappear when the index is corrected for the survivorship bias. Hence, growth strategies may have been profitable only for those agents capable to pick winners with foresight.

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Paper provided by Tor Vergata University, CEIS in its series Departmental Working Papers with number 156.

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Date of creation: Jan 2002
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Handle: RePEc:rtv:ceiswp:156

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This paper has been announced in the following NEP Reports:

NEP-ALL-2002-07-31 (All new papers)
NEP-FIN-2002-07-31 (Finance)
NEP-FMK-2002-07-31 (Financial Markets)

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