Rule Based Investing: Designing Effective Quantitative Strategies for Foreign Exchange, Interest Rates, Emerging Markets, Equity Indices, and Volatility

3. Rule Based Value Investment

Value in Emerging Markets

Value investing typically refers to the process of selecting single name stocks. Investors employ a variety of methods to determine and analyze a company’s true “value” using factors such as book value, price-to-earnings and book-to-market ratio. Starting with Fama and French¹ numerous ratios have been derived to help investors in screening and selecting the best stocks to go long or short. Although value investing isn’t typically thought of as a rule based system, in truth it is because the guidelines and criteria of value investing are a series of rules and filters used to separate the mediocre stocks from the valuable. Rather than invest in a company because it’s become popular or because ...