Fundamentals of Value versus Growth Investing and an Explanation for the Value Trap ABOUT THE CONFERENCE Value stocks earn higher returns than growth stocks on average, but a "value" position can turn against the investor. Fundamental analysis can explain this so-called value trap: The investor may be buying earnings growth that is risky. Both the earnings-to-price ratio (E/P) and the book-to-price ratio (B/P) come into play. E/P indicates expected earnings growth, but price in that ratio also discounts for the risk to that growth; B/P indicates that risk. A striking finding emerges: For a given E/P, a high B/P ("value") indicates higher expected earnings growth-but growth that is risky. This finding contrasts with the standard convention that considers a low B/P to be "growth" with lower risk. ABOUT THE SPEAKER Stephen Penman is the George O. May Professor in the Graduate School of Business, Columbia University where he is also co-director of the Center for Excellence in Accounting and Security Analysis and director of the Masters Program in Accounting and Fundamental Analysis. His research deals with the valuation of equity and the role of accounting information in security analysis, and a number of his papers deal with accounting policy issues. He has published widely in finance and accounting journals and has conducted seminars on accounting and analysis for academic and professional audiences. In 2002 Penman was awarded the American Accounting Association and Deloitte & Touche Wildman Medal for his book, Financial Statement Analysis and Security Valuation, published by McGraw-Hill/Irwin and now in its 5th edition. In 1997 he was awarded the Institute for Quantitative Investment Research (INQUIRE) Prize in the U.K. In 2005 he was awarded the Geewax Terker & Co Prize in Investment Research, and in 2011 the Roger F. Murray prize from The Institute for Quantitative Research in Finance (Q-Group). In 2009 he received an honorary doctorate from the Stockholm School of Economics and, in 2015, was elected to the Financial Economists Round Table. His book, Accounting for Value, was published by Columbia University Press in January, 2011. Stephen Penman is a founding editor of the Review of Accounting Studies and served as managing editor from 2002-2006. He is on the advisory boards of Phoenician Capital and Boston Harbor Investment Management and has served as an advisor to fundamental asset managers in the U.S., Europe, and China. He also serves on the Board of Directors of UBS Financial Services Inc. Hedge Fund Solutions and is chair of its audit committee. In 2019, Penman was elected to the Accounting Hall of Fame. In 2020, he was elected to the Australian Accounting Hall of Fame. Webinar attendance computes with 1 CPD non structured for CFA and CAd certificate holders.
