Assessing the Graham’s Formula for Stock Selection: Too Good to Be True?

Articles

Assessing the Graham’s Formula for Stock Selection: Too Good to Be True? [EBM 2014]
DOI: 10.4236/jss.2014.23001 PP.1 - 5
Author(s)
Jason Lin, Jane Sung
ABSTRACT
Benjamin Graham offered a straightforward and simple formula to evaluate stocks’ intrinsic value. Many regard the Graham Formula is a very simplistic way of measuring an individual company’s intrinsic value. Graham and Warren Buffet however felt that the simplicity of the model allowed them to quickly and accurately identify undervalued companies, and stay away from overvalued ones. In this paper, we wanted to explore the effectiveness of the Graham’s formula. We wanted to see if using the Graham’s formula, investors can achieve excess returns above the market over a period of 17 years.
KEYWORDS
Graham’s Formula; Intrinsic Value
References
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[2]
Benjamin, G. (2013) Investopedia.
http://www.investopedia.com/terms/b/bengraham.asp
[3]
Graham, B. (2006) The Intelligent Investor. Harper, New York.
[4]
Morningstar (2013) Morningstar Articles RSS.