Ben Graham Doesn’t Get Enough Credit For His Work On Quantitative Value Investing

During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Brewster discussed Ben Graham Doesn’t Get Enough Credit For His Work On Quantitative Value Investing. Here’s an excerpt from the episode:

Jake: Yeah. So, Kevin, just to give some context for everyone else, Kevin’s a professor of computer science at Washington University. He literally teaches a class on quantum computing. This guy’s crazy smart. And he’s also a fellow with O’SAM, O’Shaughnessy’s thing, where he gets academic access to all of their data and tools and stuff. So, he does research. Last context is that I’m forever grateful to Kevin because he’s the one who introduced me to my out of this world CTO that I have for Journalytic.

Kevin, he likes investing. So, he writes a lot of fresh and original research papers on his own. I think he does it on medium. But anyway, his most recent one was an article that was called Reflections on Ben Graham. I thought I’d share a few of my favorite parts of it with everybody. And so, the first point is that, he thinks that Graham actually doesn’t get enough credit. In that, he says there’s actually stronger evidence for quantitative value investing in The Intelligent Investor than Fama and French’s landmark paper.

Probably because it’s not academic, it doesn’t get held up as much as Fama-French does, but he makes the good point that the second edition of The Intelligent Investor has an out of sample study, basically, of what he talked about in the first edition. It had serious outperformance in it, which, when you look at Fama-French today, my understanding is that actually all of the outperformance is pretty much gone at this point. I don’t know. Toby, do you agree with that? Is that true?

Tobias: Is all of the outperformance gone? I don’t know if–

Jake: From 1994 to today?

Tobias: Ah, that’s the length of time of their paper. Yeah, that’s possible because it’s been such a bad run for value since 2010 or whatever. 16 years of outperformance. Well, it’s probably not 16, because the late 1990s weren’t outperformance either.

Jake: Yeah.

Tobias: Probably 30 years. It’s probably the other way around for value. I don’t know about the other factors though.

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