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Synthetic growth stocks

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  • Wai Mun Fong

    (National University of Singapore)

Abstract

Drawing from the insights of the clean surplus accounting model for stock prices, we show that combining stocks with high profitability and low-BM ratios results in a “good growth” portfolio that outperforms classical growth stocks in multiple dimensions. The proposed portfolio offers growth-style investors a much more compelling alternative to classical growth stocks which are synonymous with poor returns relative to value stocks.

Suggested Citation

  • Wai Mun Fong, 2018. "Synthetic growth stocks," Journal of Asset Management, Palgrave Macmillan, vol. 19(3), pages 162-168, May.
    • Handle: RePEc:pal:assmgt:v:19:y:2018:i:3:d:10.1057_s41260-017-0070-7
    DOI: 10.1057/s41260-017-0070-7
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    References listed on IDEAS

    as
    1. Novy-Marx, Robert, 2013. "The other side of value: The gross profitability premium," Journal of Financial Economics, Elsevier, vol. 108(1), pages 1-28.
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    3. Clifford S. Asness & Tobias J. Moskowitz & Lasse Heje Pedersen, 2013. "Value and Momentum Everywhere," Journal of Finance, American Finance Association, vol. 68(3), pages 929-985, June.
    4. Jegadeesh, Narasimhan, 1990. "Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, vol. 45(3), pages 881-898, July.
    5. Phillip Monin & Thaleia Zariphopoulou, 2014. "On the optimal wealth process in a log-normal market: Applications to risk management," Journal of Financial Engineering (JFE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 1-37.
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