Investment Style

There are some typical investment styles. Here we focus on four types.

• Value investors favor good stocks at great prices. They select stocks as they believe these stocks are undervalued. Among all the valuation indicators, we consider two important ones, i.e. the ratio of book value to market capitalization and the earnings to price ratio. They typically select stocks that are high in both dimensions. Researchers have shown that value investment can generate consistent profits, based on historical data in the U.S. market. The success of such a strategy has also been reported in Asia markets. Value investors may need to have a longer time horizon as it may take a bit of time for these stocks to be discovered and make a move.
• Growth investors are primarily focused on stocks with significant earnings growth. However, you'd expect greater volatility.
• Momentum investors believe that stocks with upward trends will continue to head in the same direction. There is a lot of evidence to support such an idea. Stocks making new highs tend to make even higher highs. However, coming back to Asia markets, evidence is mixed. Such a strategy works in some markets but not in others.
• Income investors look for stocks that generate a good dividend. So dividend yield would be one of the key indicators for these investors. 
• Earnings revision strategy is based on analysts' earnings revisions for the current financial year. A up revision ratio is provided here as measured by the number of analysts with upward revisions minus the number of analysts with downward revisions divided by the total number of analysts providing the mean earnings forecast in a particular month. One problem with this investment style is that many stocks are not covered at all or by very few analysts.