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Synthetic growth stocks

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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.

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Notes

  1. The results are not very sensitive to different levels of risk aversion.

  2. Based on series CPIAUCSL (Consumer Price Index for All Urban Consumers) from the Federal Reserve Bank of St. Louis database. The sample period is 1963–2015.

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Correspondence to Wai Mun Fong.

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Fong, W.M. Synthetic growth stocks. J Asset Manag 19, 162–168 (2018). https://doi.org/10.1057/s41260-017-0070-7

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  • DOI: https://doi.org/10.1057/s41260-017-0070-7

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