CONSTANT GROWTH INVESTMENT STRATEGIES FOR US LARGE CAP COMPANIES

Peer reviewed: 
No, item is not peer reviewed.
Date created: 
2010-09-02
Keywords: 
Constant Growth Expected Returns
Large Cap
S&P 500,
Dividend Yield
Earnings Per Share
GAWM
Abstract: 

Using data from several sources, a new investment model, the Constant Growth of Expected Returns model (the CGER model) is tested as an investment strategy for individual investors. We utilize the constant growth of expected return (CGER) formula as the fundamental variable for analysis and build portfolios that we test over time compared to the Standard and Poor?s 500 Index as a benchmark. The largest companies that fit our criteria (for a maximum of 49 companies) for every year for the past twenty years (based on market cap and CGER) will be examined. And then, we compare realized returns to the S&P 500 for further analysis in different holding periods (monthly, quarterly, yearly) and three different investment strategies, namely, the High CGER Portfolio (HP), the Low CGER Portfolio (LP), and the High-Low Combination Portfolio (H-L Portfolio). We only use companies with positive earnings per share (EPS thereinafter), positive book value per share, and positive dividends. Our results show that the CGER model outperforms the S&P 500 index in various holding periods and the most impressive result came from the High CGER portfolio. By comparing the returns of the holding periods, we show that the most consistent results were garnered by utilizing both the High and Low CGER portfolios over different holding periods.

Description: 

Research Project (M.B.A.) - Simon Fraser University

Language: 
English
Document type: 
Thesis
Senior supervisor: 
Andrey Pavlov
Department: 
Business Administration
Thesis type: 
Research Project (M.B.A.): Global Asset and Wealth Management Program
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