Abe’s Third Arrow Will Work In Favor Of Japan’s Value Investors

Japan has long been one of the value investors’ markets of choice. The country’s long-term bear market, stagnating economy and number of cash rich companies has created a wealth of deep value opportunities.

But over the past two-and-a-half decades, the performance of a deep value strategy in Japan’s equity markets has deteriorated. The white paper Performance of Value Investing Strategies in Japan’s Stock Market examined the performance of equal-weight and market capitalization weighted quintile portfolios of five price ratios; price-to-book value, dividend yield, earning-to-price, cash flow-to-price, and leverage-to-price–excluding the smallest 33% of stocks by market capitalization over a period of 37 years. The portfolios were rebalanced monthly. For the price-to-book portfolio, the authors found that over the 37...