Abstract
The different investing approaches can be compared by analyzing a potential investment in Apple and JPMorgan Chase. Investing 1.0 tries to predict which direction these two stock prices will go next. Investing 2.0 estimates intrinsic values without an explicit consideration of risk. Investing 3.0 uses historical returns to estimate mean–variance portfolios. Investing 4.0 assumes an efficient market and invests in an S&P 500 index fund that holds modest amounts of Apple and JPM. Investing 5.0 uses historical data to estimate beta coefficients for CAPM and other factor models. Investing 6.0 estimates the future income from these two stocks and measures risk by the uncertainty in these income projections.
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Smith, G., Smith, M. (2023). A Case Study—Stocks. In: The Power of Modern Value Investing. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-45900-9_7
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DOI: https://doi.org/10.1007/978-3-031-45900-9_7
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Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-031-45899-6
Online ISBN: 978-3-031-45900-9
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