Quantitative Value, + Web Site: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors
Author(s): Wesley R. Gray (Author), Tobias E. Carlisle (Author)
Publisher: Wiley
Publication Date: December 26, 2012
Edition: 1st
Language: English
Print length: 288 pages
ISBN-10: 1118328078
ISBN-13: 9781118328071
Book Description
A must-read book on the quantitative value investment strategyLegendary investment gurus Warren Buffett and Ed Thorp represent different ends of the investing spectrum: one a value investor, the other a quant. While Buffett and Thorp have conflicting philosophical approaches, they agree that the market is beatable. In Quantitative Value, Wesley Gray and Tobias Carlisle take the best aspects from the disciplines of value investing and quantitative investing and apply them to a completely unique and winning approach to stock selection. As the authors explain, the quantitative value strategy offers a superior way to invest: capture the benefits of a value investing philosophy without the behavioral errors associated with “stock picking.” To demystify their innovative approach, Gray and Carlisle outline the framework for quantitative value investing, including the four key elements the investment process:
1) How to avoid stocks that can cause a permanent loss of capital: Learn how to uncover financial statement manipulation, fraud, and financial distress.
2) How to find stocks with the highest quality: Learn how to find strong economic franchises, and robust financial strength. Gray and Carlisle look at long term returns on capital and assets, free cash flow, and a variety of metrics related to margins and general financial strength.
3) The secret to finding deeply undervalued stocks: Does the price-to-earnings ratio find undervalued stocks better than free cash flow? Gray and Carlisle examine the historical data on over 50 valuation ratios, including some unusual metrics, rare multi-year averages, and uncommon combinations.
4) The five signals sent by smart money:The book uncovers the signals sent by insiders, short sellers, shareholder activists and institutional investment managers.
After detailing the quantitative value investment process, Gray and Carlisle conduct a historical test of the resulting quantitative value model. Their conclusions are surprising and counter-intuitive.
The book includes a companion website that offers a monthly-updated screening tool to find stocks using the model outlined in the book, an updated back-testing tool, and a blog about recent developments in quantitative value investing. For any investor who wants to make the most of their time in today’s complex marketplace, they should look no further than Quantitative Value.
Editorial Reviews
Review
“Quantitative Value is a must read for those with a love of value investing and a desire to make the investment process less ad-hoc. A must read.”–Tony Tang, Ph.D., Global Macro Researcher and Portfolio Manager, AQR Capital Management
“Gray and Carlisle take you behind the curtains to build a black box based on the best value minds in finance. They combine academia’s best ideas with the ideas of Buffet, Graham, and Thorp, to develop a quant system that performs in markets both good and bad.”–Mebane Faber, Author of The Ivy Portfolio and Portfolio Manager for Cambria Investment Management
“This book is an excellent primer to quantitative investing. It combines insights from both academic luminaries and successful professional investors, and presents them in a clear, engaging manner. The authors rigorously back-test simple strategies that can be used by the individual as well as institutional investor.”–Alex Edmans Ph.D., Finance Professor at The Wharton School, University of Pennsylvania
“Quantitative Value is the new guide to Graham-and-Doddsville. Gray and Carlisle synthesize the lessons of the great value investors to systematically identify high quality value stocks while avoiding common behavioral pitfalls.”–Tadas Viskanta, Founder and Editor, Abnormal Returns; Author of Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere.
“We seek to marry Ed Thorp’s quantitative approach to Warren Buffett’s value investment philosophy.” That’s the approach we take in our Value Investing class at UC Davis and Quantitative Value will become required reading for our class. The book we wish we would have written!”–Lonnie J. Rush and Jacob L. Taylor, Managing Partners of Farnam Street Investments and Visiting Professors at UC Davis Graduate School of Management
From the Inside Flap
Legendary investment gurus Warren Buffett and Ed Thorp represent different ends of the investing spectrum: one a value investor, the other a quant. While Buffett and Thorp have conflicting philosophical approaches, they agree that the market is beatable. In Quantitative Value, Wesley Gray and Tobias Carlisle take the best aspects from the disciplines of value investing and quantitative investing and apply them to a completely unique and winning approach to stock selection. As the authors explain, the quantitative value strategy offers a superior way to invest: capture the benefits of a value investing philosophy without the behavioral errors associated with “stock picking.” To demystify their innovative approach, Gray and Carlisle outline the framework for quantitative value investing, including the four key elements the investment process:
1)
How to avoid stocks that can cause a permanent loss of capital: Learn how to uncover financial statement manipulation, fraud, and financial distress.
2)
How to find stocks with the highest quality: Learn how to find strong economic franchises, and robust financial strength. Gray and Carlisle look at long term returns on capital and assets, free cash flow, and a variety of metrics related to margins and general financial strength.
3)
The secret to finding deeply undervalued stocks: Does the price-to-earnings ratio find undervalued stocks better than free cash flow? Gray and Carlisle examine the historical data on over 50 valuation ratios, including some unusual metrics, rare multi-year averages, and uncommon combinations.
4)
The five signals sent by smart money:The book uncovers the signals sent by insiders, short sellers, shareholder activists and institutional investment managers.
After detailing the quantitative value investment process, Gray and Carlisle conduct a historical test of the resulting quantitative value model. Their conclusions are surprising and counter-intuitive.
The book includes a companion website that offers a monthly-updated screening tool to find stocks using the model outlined in the book, an updated back-testing tool, and a blog about recent developments in quantitative value investing. For any investor who wants to make the most of their time in today’s complex marketplace, they should look no further than
Quantitative Value.
From the Back Cover
Quantitative Value offers investors a groundbreaking book and companion website that combines the best aspects of Warren Buffett’s value investing philosophy with Ed Thorp’s quantitative approach. By tapping into the strategies outlined in this book and delving into the companion website, savvy investors can harness the power of Gray and Carlisle’s winning Quantitative Value approach to stock selection. Gray and Carlisle offer a blueprint for their unique investment strategy and show what it takes to capture the benefits of value investing and leave behavioral errors at the doorstep. The book is filled with solid advice for finding hidden investment gems that outperform over time. Gray and Carlisle also reveal their insiders’ secrets for uncovering bargain prices in the marketplace and how to read the signals from smart money investors. Quantitative Value is your key to automating intelligent investment and eliminating behavioral errors.
Endorsements “Gray and Carlisle take you behind the curtains to build a black box based on the best value minds in finance. They combine academia’s best ideas with the ideas of Buffet, Graham, and Thorp, to develop a quant system that performs in markets both good and bad.”
–Mebane Faber, Author of
The Ivy Portfolio and Portfolio Manager for Cambria Investment Management “An elegant synthesis of Warren Buffett’s value investment philosophy and Ed Thorp’s quantitative approach. Quantitative Value belongs on every investor’s bookshelf.” –Charles Mizrahi, Author of Getting Started in Value Investing & Editor of Hiddenvaluesalert.com
“Quantitative Value is the new guide to Graham-and-Doddsville. Gray and Carlisle synthesize the lessons of the great value investors to systematically identify high quality value stocks while avoiding common behavioral pitfalls.” –Tadas Viskanta, Founder and Editor, Abnormal Returns; Author of Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere.
“
Quantitative Value is a must read for those with a love of value investing and a desire to make the investment process less ad-hoc. A must read.” –Tony Tang, Ph.D., Global Macro Researcher and Portfolio Manager, AQR Capital Management
“We seek to marry Ed Thorp’s quantitative approach to Warren Buffett’s value investment philosophy.” That’s the approach we take in our Value Investing class at UC Davis and
Quantitative Value will become required reading for our class. The book we wish we would have written!” –Lonnie J. Rush and Jacob L. Taylor, Managing Partners of Farnam Street Investments and Visiting Professors at UC Davis Graduate School of Management
“A clear and concise vision of how the two dominant disciplines of modern investing (quant and value) can be combined in actionable ways that produce outsized returns over the market.” -Christopher Cole, CFA, Founder and Portfolio Manager, Artemis Capital Management LLC
“Gray and Carlisle successfully bridge the gap between fundamental and quantitative value investing–an extremely worthy endeavor and, likewise, an extremely rewarding read.” — MacDuff Kuhnert, CFA, Quantitative Portfolio Manager, Causeway Capital Management LLC
“If you liked
The Little Book that Beats the Market, you will love Quantitative Value. Gray and Carlisle take systematic value-based investing to the next level.” –Raife Giovinazzo, Ph.D., CFA, Research Analyst in Scientific Active Equity, Blackrock
“A must read for any investor. The book outlines a broad set of indicators, which can be used to form a quantitative strategy or supplement traditional fundamental analysis. These indicators have been tested by numerous academic studies and represent an invaluable toolset for any investor.”
–Gil Sadka, Ph.D., Associate Professor of Accounting, Columbia Business School
This book is an excellent primer to quantitative investing. It combines insights from both academic luminaries and successful professional investors, and presents them in a clear, engaging manner. The authors rigorously back-test simple strategies that can be used by the individual as well as institutional investor.
–Alex Edmans Ph.D., Associate Professor of Finance, The Wharton School, University of Pennsylvania
About the Author
WESLEY R. GRAY, Ph.D., is the founder and Executive Managing Member of Empiritrage, LLC, an SEC-Registered Investment Advisor, and Turnkey Analyst, LLC, a firm dedicated to educating and sharing quantitative investment techniques to the general public. He is also an Assistant Professor of Finance at Drexel University’s LeBow College of Business, where his research focus is on value investing and behavioral finance. Professor Gray teaches graduate-level investment management and a seminar on hedge fund strategies and operations. Dr. Gray’s professional and leadership experiences include over 14 years building systematic trading systems and trading special situations, and service as an active-duty U.S. Marine Corps ground intelligence officer (Captain) in Iraq and various posts in Asia. Dr. Gray earned an MBA and a Ph.D. in finance from the University of Chicago Booth School of Business. He graduated magna cum laude with a BS in economics from The Wharton School, University of Pennsylvania.
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