Empirical Study of Greenblatt Magic Formula Components in Taiwan Stock Market

• Main Authors: LIAO YING-TING, 廖英廷
• Other Authors: LIU, HAN-YU
• Format: Others
• Language: zh-TW
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/gsba7r

碩士 === 康寧大學 === 企業管理研究所 === 106 === Magic formula is one of the methods of value investing. Its components include the return on capital and the earnings yield. This study takes public traded companies in Taiwan from 2005 to 2016 as the research subject, and ranks the stocks every year with the return on capital, the earnings yield and the magic formula to create portfolios and compare performance of portfolios with the Taiwan 50 index. The empirical result shows that the portfolio of magic formula has the best performance, reaching 140.87% of the total return and 7.6% of the annualized return. As for the risk of portfolios, the standard deviation of return on capital is the lowest. The downside standard deviation of magic formula is the lowest, and it is lower than Taiwan 50 index. The Sharpe ratio and the Sortino ratio of magic formula are better than the other portfolios. However, the performance of the return on capital and the magic formula was only better than that of Taiwan 50 index in 6 years, and the performance of the earnings yield was only better than Taiwan 50 index in 5 years. Thus it can be seen that if investors want to use the magic formula to create excess return, they must endure the rate of return will be less than the index in some years. In the one-way ANOVA, the results of the analysis are not significantly different and it is impossible to prove that there is a significantly difference between the returns of each portfolio and the Taiwan 50 index.