Constructing a Fundamental Portfolio by Buffett's Stock Selection Model：Evidence from Taiwan

• Main Authors: Ya-hsuan Li, 李雅璇
• Other Authors: Chung-da Ho
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/44854394183440494571

碩士 === 國立中央大學 === 財務金融學系 === 101 === The weights of the market capitalization-weighted portfolio will be ups and downs with the changing of the stock price. Therefore, when the prices deviate from the true value, the indexes which compile with market prices or market capitalization would be overvalued or undervalued. Due to the non-price-oriented characteristic of the fundamental weighted indexation as well as the equal-weighted indexation, they are closer to the real value. In recent years, the fund managers usually use the value investment as their investment strategies. The value investment strategy emphasizes the performance of the companies in operating fundamental aspect, instead of the short-term fluctuations in stock prices or the trend of the market condition. With the analysis of the company's operating performance, including the profitability, growth, and the value of financial risk, we can find out the true value of the company. Therefore, this paper first uses the Warren Buffet’s value investment method to construct a portfolio, and then combines it with the fundamental weighted method to construct another portfolio, to see whether these two portfolios would beat the market index or the market capitalization-weighted portfolio in Taiwan market. The empirical result shows that the performance of Warren Buffet’s value investment portfolio is significantly better than the market index. And the Warren Buffet’s fundamental portfolio, compared to the market capitalization-weighted portfolio, has average excess return about 17.75%, which represents that the Warren Buffet’s fundamental portfolio obviously beats the capitalization-weighted portfolio.