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Comparing Performances of the Portfolios Created According to the Net Working Capital Approach: Example of Istanbul Stock Exchange

Author

Listed:
  • Mehmet Emin Yıldız

    (Doğuş University)

  • Naci Yılmaz

    (Doğuş University)

Abstract

Testing whether portfolios created by using graham's net working capital (nwc) approach offer greater returns than the bist 100 index is the main purpose of this study. Accordingly, between 2000 and 2020, the performance of the portfolios created by the nwc approach in istanbul stock exchange (bist) was measured by "back-tests" and compared using portfolio performance measurement techniques. As a result of the study, while portfolios of shares with the ratio of a market value to net working capital being greater than 1 provide an average monthly additional return of 2.19% compared to the bist 100 index, according to sharp ratio, they also offered a better combination of risk-return than other portfolio groups. Another important result is that the reason for the portfolios selected with the nwc approach to deliver excess returns over the market may be independent of the company size.

Suggested Citation

  • Mehmet Emin Yıldız & Naci Yılmaz, 2020. "Comparing Performances of the Portfolios Created According to the Net Working Capital Approach: Example of Istanbul Stock Exchange," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 35(114), pages 241-262, October.
    • Handle: RePEc:acc:malfin:v:35:y:2020:i:114:p:241-262
    DOI: https://doi.org/10.33203/mfy.784933
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    More about this item

    Keywords

    Net Working Capital; Graham; Portfolio Performance Measurement Techniques; BIST100 index; Anomaly;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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