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Value Investing: Circle of Competence in the Thai Insurance Industry

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  • Sampan Nettayanun

Abstract

This study explores the strategy of value investing, specifically for the insurance industry in Thailand. It employs multiple measures of "value," suitable for insurance companies, such as the price-to-earning (PE), price-to-book (PB), and cyclically adjusted price-to-earnings (CAPE). Value premium exists in the Thai insurance industry. Most of the value portfolios constructed from these measures significantly outperform the market, even when adjusting for price volatility and portfolio's $\beta$. The cumulative returns are also higher for the value stocks, when compared to the growth stocks, and the Thai stock market. Constructing a value portfolio, using the PE ratio, results in the highest returns and are far better than PB and CAPE. The value anomaly cannot be fully explained by either the capital asset pricing model or the Fama-French 3 factor models.

Suggested Citation

  • Sampan Nettayanun, 2016. "Value Investing: Circle of Competence in the Thai Insurance Industry," PIER Discussion Papers 46, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:46
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    References listed on IDEAS

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    More about this item

    Keywords

    Value Investing; Portfolio Management; Circle of Competence; Risk Management; Insurance; Property & Liability Insurance; Life Insurance;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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