Financial Markets and Portfolio Management

, Volume 33, Issue 4, pp 471–490 | Cite as

Buffett’s alpha: further explanations from a behavioral value investing perspective

  • Eben OtuteyeEmail author
  • Mohammad Siddiquee


Warren Buffett has had extraordinary success as an investor, but there is no agreement as to why. Some academic researchers attribute his performance to mere luck. Frazzini et al. (Financ Anal J 74(4):35–55, 2018), concluded that his alpha is due to leveraging safe, high-quality, and cheap stocks. However, there has been no analysis to date of Buffett’s performance from a behavioral perspective. We argue that Buffett’s success is partly due to qualitative and psychological factors, including tenacity, patience, avoidance of overconfidence, organizational culture, and the reputation effect. Using information from shareholder letters, writings, interviews, and speeches by Buffett and his colleague Charlie Munger, we demonstrate how such psychological factors, together with the quantitative findings of Frazzini et al., render a more complete and satisfying explanation of Buffett’s alpha.


Warren Buffett Value investing Behavioral finance Alpha 

JEL Classification

G11 G12 G22 G32 G41 



The authors thank Markus Schmid, the Editor, and an anonymous referee for helpful comments.


This research was not supported by any funds (research grant or other funds) from any organization or person.


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Copyright information

© Swiss Society for Financial Market Research 2019

Authors and Affiliations

  1. 1.Faculty of Business AdministrationUniversity of New BrunswickFrederictonCanada
  2. 2.Department of Business Administration and Tourism and Hospitality ManagementMount Saint Vincent UniversityHalifaxCanada

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