Buffett's Alpha
Andrea Frazzini, David Kabiller, Lasse H. Pedersen
Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett's leverage is about 1.6-to-1 on average. Buffett's returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires' portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett's returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors
Year of publication: |
November 2013
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Authors: | Frazzini, Andrea |
Other Persons: | Kabiller, David (contributor) ; Pedersen, Lasse H. (contributor) |
Institutions: | National Bureau of Economic Research (contributor) |
Publisher: |
Cambridge, Mass : National Bureau of Economic Research |
Subject: | Portfolio-Management | Portfolio selection | Investmentfonds | Investment Fund | Holding | Holding company | Rendite | Yield |
Saved in:
freely available
Extent: | 1 Online-Ressource |
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Series: | NBER working paper series ; no. w19681 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Mode of access: World Wide Web System requirements: Adobe [Acrobat] Reader required for PDF files Hardcopy version available to institutional subscribers. |
Other identifiers: | 10.3386/w19681 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012458981