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Webinar: Valuation Beta: A New Asset Pricing Paradigm

Speaker: Derek Bergen, CFA, portfolio manager, and quantitative research analyst

Presentation details:

  • The evolution of quantitative finance presumes that the identification of undervalued securities is no longer a necessary consideration in portfolio construction, which has materially shifted equity allocation towards passive and factor-based strategies over the last decade.
  • Out-of-sample study of a comprehensive intrinsic value framework within asset pricing studies popularized by Fama French indicate that an intrinsic value factor provides significant alpha in asset pricing.
  • Development of an asset pricing model based on valuation principles explains cross-sectional returns better than other commonly cited models, indicating that the abandonment of net present value techniques and the best practice in security analysis is a shortcoming in current factor literature.

We will discuss practical implications for investors:

  1. Price multiples are not a reliable proxy for intrinsic value.
  2. The investment rate factor’s preference towards low/negative growth is not consistent with the role of growth in creating shareholder value.
  3. Passive strategies deliver significant negative alpha against asset pricing models that incorporate an intrinsic value framework.

Click here, to view the presentation.

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