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Dr. George Athanassakos is a Professor of Finance and the Ben Graham Chair in Value Investing at Ivey Business School, which he joined in July 2004. He is also the Founder & Managing Director of The Ben Graham Centre for Value Investing, which he launched in 2006, and the Founder and Managing Director of the Center for the Advancement of Value Investing Education, which he launched in 2008. Prior to joining Ivey, Dr. Athanassakos spent a number of years at various research-related positions with banking and trust companies in Canada and Greece, and taught at York University and Wilfrid Laurier University, where he was professor of Finance and Founder & Director of Laurier's Financial Planning Program. He has a BA in Economics and Business Administration from The School of Industrial Studies of Thessalonica, Greece, and an MA in Economics, an MBA and a PhD in Finance from York University. The Financial Planning Standards Council has bestowed Dr. Athanassakos with the FP Canada™ Fellow distinction for his outstanding contribution to furthering FPSC's mission and for advancing the financial planning profession. Dr. Athanassakos is also a Fellow of the Quality Shareholder Initiative at the Law School of George Washington University in Washington, DC. He is the only Canadian to receive this distinction. Dr. Athanassakos' contribution to value investing was honoured by Woxsen University which has established the George Athanassakos Chair in Value Investing.
Dr. Athanassakos has been ranked among the top 10 researchers in Canada by research published in Financial Management and among the top 10 Canadian professors by the Globe and Mail. He has researched extensively the institutional attributes of the Canadian capital markets, the effect institutional trading and analysts' forecasts have on stock market performance, stock and bond market anomalies and bond and equity valuation issues. He has prepared studies on the Canadian capital markets and industry analyses for Greece and Canada. His cases have been published in Canadian Cases in Financial Accounting, Cases in Hospitality Management and Case Research Journal.
Dr. Athanassakos has offered seminars on traditional valuation and/or value investing valuation to Canadian and US valuator societies, and in Australia, Austria, Chile, Colombia, Cyprus, Denmark, France, Finland, Greece, Italy, Liechtenstein, South Africa, Spain and United Kingdom. He is recipient of teaching awards, such as Ivey’s Teaching Innovation Award and Western University’s USC Teaching Honor Roll, and of numerous research grants from University and Government departments, as well as winner of numerous first prize awards for best research papers, including three times winner (1991, 1994, and 2003) of the Toronto Society of Financial Analysts' Best Research Paper Award Competition. Dr. Athanassakos has served as a member of the Board of Directors of the Financial Planners Standards Council of Canada, a member of the Board of Directors of the Canadian Institute of Financial Planners, a member of the Editorial Board of the Canadian Investment Review, a member of the Research Advisory Board of the Canadian Securities Institute and Clarica Financial Services Research Center, and the VP-Membership and President of the Multinational Finance Society. He has also been in the Program Committees of the Eastern Finance Association, European Financial Management Association, Midwest Finance Association, Multinational Finance Association, Northern Finance Association and Southern Finance Association conferences, among others and served as the Chair and Organizer of the 1999 Multinational Finance Conference in Toronto, Ontario, the Ben Graham Center’s Symposiums on Intelligent Investing (since 2007) in London, Ontario, Crete, Greece and Toronto, Ontario, and the Ben Graham Centre's Value Investing Conferences (since 2012) in Toronto, Ontario. He is currently an editor-in-chief of the Journal of Business and Financial Affairs, an Editor of the Multinational Finance Journal, an editor of the International Journal of Economics and Business Administration, a member of the Editorial Board of the European Research Studies Journal, a member of the Academic Advisory Board of the Financial Planners Standards Council and a member of the Board of Trustees of the Multinational Finance Society.
Dr. Athanassakos has published in numerous journals including Journal of Banking and Finance, Applied Financial Economics, Journal of Business Finance and Accounting, Journal of Financial Research, Financial Analysts' Journal, Canadian Journal of Administrative Sciences, Journal of Economics and Business, Review of Financial Economics, Multinational Finance Journal, Advances in Futures and Options Research and others. His books include Derivatives Fundamentals (available through the Canadian Securities Institute),Equity Valuation: A Guide to Discounted Cash Flow and Relative Valuation Methods and Value Investing: From Theory to Practice – A Guide to the Value Investing Process. Dr. Athanassakos has also written articles for the Financial Post and MoneySense magazine and currently writes, as a guest columnist, about investments and economic and financial topics in The Globe and Mail, Canada's largest daily newspaper, and the Canadian Investment Review.
Abstract: The aim of this study is to examine whether good asset allocation by a CEO leads to superior stock returns and, if so, how one might be able to identify CEOs that are good asset allocators. Employing US data from May 2001 to April 2019, we find that CEOs that invest the company’s cash flows according to a value-investing style seem to outperform companies that do not. We find that high goodwill to assets and high operating margin (good asset allocator) companies outperform companies with high or low goodwill to assets and low operating margin (poor asset allocator) companies. The findings are corroborated with out-of-sample (May 2019–April 2023) robustness tests. When buying other businesses, value investor CEOs ensure that their consolidated operating margins remain high, as opposed to other firms managed by poor asset allocator CEOs who buy businesses that bring down operating margins, either because they overpay or due to an inability to materialize expected synergies. Using both summary statistics and regression analysis, the findings of this study help us identify companies that allocate assets like value investors and enable us to anticipate future stock performance. For example, if a company, on average, has a goodwill/assets ratio of 41.03%, and an operating margin of 21.38%, it is likely this firm would be at the top quartile in terms of stock return performance over at least the next three years. At the same time, if a firm has a low average goodwill/assets ratio (i.e., 1.95%), its operating margins, on average, should be 24.46%, if it wants to achieve a similar performance as that of firms with high goodwill/assets. Moreover, the future stock return predictability of high (low) goodwill/assets and high (low) operating margin firms, found in this study, can help an investor develop trading strategies that can lead to superior stock price performance by effectively taking long positions in (shorting) firms that are (not) managed by value investor CEOs. Finally, the paper’s findings can also help investors in another way. For example, investors tend to be skeptical about companies with high goodwill/assets. The rule of thumb is to beware of companies carrying goodwill on their balance sheets that is more than 25% of assets. Based on our findings, this should not be a problem as long as the company’s operating margin has remained high and is rising.
Abstract: Using Canadian data for the period 1957–2018, this paper provides evidence in support of portfolio rebalancing by professional portfolio managers. We document strong seasonality in returns of Canadian stock and government bond indexes. However, the seasonality in the returns of the Canadian government bond index is opposite in direction to that of the Canadian stock index. Seasonal strength is observed in equities, especially smaller-cap stocks, at the beginning of the year, with the rest of the year, especially the second half, showing widespread seasonal weakness in relation to January. The opposite is true for Government of Canada bonds, confirming the predictions of the portfolio rebalancing hypothesis. In addition, this paper provides support for the popular expression “sell in May and go away”, as the average performance of risky securities is higher in the November to April period than in the May to October period. The opposite is true for Government of Canada bonds, which is also consistent with portfolio rebalancing. The paper’s findings will be useful not only to institutional investors but also to individual investors. Understanding the seasonal behavior of financial markets and the inefficiencies bestowed on them by institutional factors will help investors secure higher returns and a better retirement.
Abstract: This study examines whether a value premium still exists in Canada. The evidence presented in this paper suggests that the Canadian value premium persists in recent years, particularly for stocks with low prices. The value premium is argued to be countercyclical so that the strength of the business cycle in causing longer expansions and deeper contractions can lead to trends and plunges in the value premium. While some declare that the value premium is dead, our evidence suggests it has not evaporated in Canada most likely due to the combined effects of a stable Canadian economy, and industries that are less growth oriented.
Abstract: We reexamine the seasonal pattern in excess returns of highly visible American firms. In contrast to the seasonality for risky, less visible firms, we find that highly visible stocks display return seasonality that is opposite in direction. Fund managers are prone to gamesmanship, putting downward pressure on prices for highly visible firms at the beginning of the year, reversing later with buying pressure. Because of the bonus culture, fund managers start the year by buying small, risky stocks in order to beat benchmarks. Once targets are met, they adjust toward visible, less risky stocks to lock in returns, giving them a seasonal returns pattern opposite to that of small firms. A re-examination is warranted because the world has become increasingly globalized and some argue that managers’ incentives are aligned with investors due to increased scrutiny. We use analyst following to proxy for visibility and examine the seasonal pattern for 1997-2018. Though the anomaly was first reported twenty years ago, it persists in recent data. Rational investors may be limited in their ability to arbitrage mispricing because institutional investors who drive the market are self-interested. Future research may examine the seasonal pattern in countries with more stringent regulation of financial professionals.
Abstract: The purpose of this paper is to examine whether earnings quality contributes to the book-to- market’s predictive power in the cross section of stock returns. Earnings quality is embedded in the value-growth effect given that retained earnings is a key part of the book value of equity. Earnings quality reflects the effects of managerial discretion on reported earnings, which has been shown to be associated with both risk and behavioral biases in asset pricing. Our results affirm the existence of a value premium and show that the value premium is more pronounced within poor earnings quality stocks. Moreover, we find that poor earnings quality contributes to the value premium mainly through the pricing of growth stocks. Our results suggest that the quality of reported earnings has an incremental role in shaping expected returns of value versus growth stocks.
Abstract: The purpose of this paper is to examine whether earnings quality contributes to the book-to-market’s predictive power in the cross section of stock returns. Earnings quality is embedded in the value-growth effect given that retained earnings is a key part of the book value of equity. Earnings quality reflects the effects of managerial discretion on reported earnings, which has been shown to be associated with both risk and behavioral biases in asset pricing. Our results affirm the existence of a value premium and show that the value premium is more pronounced within poor earnings quality stocks. Moreover, we find that poor earnings quality contributes to the value premium mainly through the pricing of growth stocks. Our results suggest that the quality of reported earnings has an incremental role in shaping expected returns of value versus growth stocks. (JEL: G12, M41).
Ackert, L. F.; Athanassakos, G.; Church, B. K., 2015, "Individual psychology and investment style", International Journal of Behavioural Accounting and Finance, January 5(2): 175 - 201.
Abstract: This paper sheds light on the individual characteristics associated with investment style. A vast literature documents the importance of individual personality in explaining variation in choice, yet many questions remain regarding the determinants of investment choices. We use an experimental method to isolate participants' preference for value vs. growth stocks. Recent research suggests that biology plays a significant role in determining investment style. We extend this research by examining whether measurable behavioural and personality factors predict investment style, including risk tolerance, time preference, overconfidence, personal evaluation of the investment opportunity, and character strengths. Importantly, we find that an individuals' personal affective assessment of an investment opportunity plays a significant role in the determination of investor style.
Abstract: Using separately interlisted and non-interlisted Canadian stock market data for the period 1985-2010, the main purpose of this paper is to examine whether negative PE stocks are really different than positive PE firms, and whether negative PE stocks outperform, on average, the universe of positive PE stocks. The paper also purports to examine (a) whether interlisted and non-interlisted firms behave similarly or there are distinct differences between them and (b) whether there are differences in relation to this paper’s key questions only in one group of stocks or differences are equally driven by both. We find that firms with negative multiples are indeed different than firms with positive multiples in that (a) a relatively small number of firms with negative multiples experience high forward stock returns even though the majority of them does not resulting in a large difference between mean and median returns and (b) the value, size, liquidity and business risk premiums behave differently for negative vs. positive PE firms. This indicates that prior academic research was right in excluding negative multiple firms from their analysis. Moreover, the paper also shows that there are key differences between interlisted and non-interlisted firms both in the positive and negative PE space. As a result, not only must negative PE firms be segregated from positive multiple firms, but also interlisted firms ought to be segregated from non-interlisted firms in related research as aggregation would undermine the clarity and generality of findings, affect the homogeneity of the sample and dilute findings and tests of significance.
Abstract: The purpose of this paper is two-fold (a) to determine whether there is value premium in our sample of US stocks for the period May 1, 1969-April 30, 2011, and (b) to examine whether an additional screening to the first step of the value investing process can be employed to separate the outperforming value and growth stocks from the underperforming ones. In this paper, we document the following: We find a consistently strong and pervasive value premium over the sample period. We show that there are distinct differences between US exchanges which means that papers that aggregate all US exchanges under one umbrella may dilute findings and bias conclusions. The stocks of AMEX firms, high business risk firms and firms that report extraordinary items experience worse returns than the rest of the US stocks in our sample. We find that PE based sortings produce better overall results than sortings based on PB. We are able to construct a composite score indicator (SCORE), combining various fundamental and market metrics, which enable us not only to separate the winners from the losers among value and growth stocks, but also to predict future returns of value and growth stocks. SCORE portfolios give better results for sortings based on PE and when we employed a cross section - time series medians approach. Results remain robust for a time period out of sample, for negative PE or PB ratio firms and for the firms that were excluded from SCORE based performance, namely, AMEX stocks, stocks with high business risk and firms that reported extraordinary items the year before. Finally, we provide evidence that the return of a portfolio strategy that buys (sells) stocks that rank low (high) in the composite score indicator has significant explanatory power in an asset pricing model framework and that such a strategy earns statistically significant positive returns.
Abstract: Using separately AMEX, NASDAQ and NYSE stock market data for the period 1968-2011, the purpose of this paper is to examine whether negative multiple firms are different from positive ones by examining the performance of negative PE or PB firms and how this performance compared with the most widely examined positive multiples firms. We find that firms with negative multiples are indeed different than firms with positive in that (a) a relatively small number of firms with negative multiples experience high forward stock returns even though the majority of them does not resulting in a large difference between mean and median returns and (b) the small firm-low liquidity effect observed in positive multiple firms is not as clearly observed in the case of negative multiple firms. This indicates that prior academic research was right in excluding negative multiple firms from their analysis as inclusion would have affected the homogeneity of their sample and would have diluted their findings and tests of significance.
Abstract: The paper investigates two questions (a) whether there is value premium in a sample of Canadian non-interlisted stocks for the period May 1, 1985 April 30, 2009, and (b) whether an additional step to screening for possibly undervalued stocks can be employed to separate the good stocks from the bad ones, as not all low PE stocks are worth investing in. The paper extends this analysis to both value and growth stocks. We document a consistently strong value premium over the May 1, 1985 April 30, 2009 sample period, which persists in both bull and bear markets, as well as in recessions and recoveries. We show that the value premium is not driven by a few outliers, but it is pervasive. Our results are consistent with, but, in general, stronger than, those of other Canadian and US studies. We were able to construct a composite score indicator (SCORE), combining various fundamental and market metrics, which enabled us to predict future stock returns and separate the winners from the losers among value and growth stocks. A strategy which would involve shorting the high SCORE value stocks and buying the low SCORE value stocks would have beaten the low PE portfolio by about 30% over the May 1, 1985 April 30, 2009 period. On the other hand, shorting the high SCORE growth stocks and buying the low SCORE growth stocks would have beaten the high PE portfolio by about 40% over the same period. We also find that the return of a portfolio strategy that buys (sells) stocks that rank low (high) in the composite score indicator has significant explanatory power in an asset pricing model framework. Results remain robust out of sample.
Abstract: The purpose of this paper is two-fold. First, to determine whether there is value premium in our sample of Canadian non-interlisted and interlisted stocks for the period May 1, 1985-April 30, 2010. Second, to examine whether an additional screening to the first step of the value investing process can be employed to separate the good value stocks from the bad ones. For both non-interlisted and interlisted stocks, we document a consistently strong value premium over the sample period, which persists in both bull and bear markets, as well as in recessions and recoveries for noninterlisted stocks, but less so for interlisted stocks. We show that the value premium is not driven by a few outliers, but it is pervasive. Interlisted stocks have a higher value premium than non-interlisted stocks. The other difference between interlisted and non-interlisted firms is with regards to stock liquidity, debt to equity and market cap metrics, as well as to the fact that a typical size effect does not exist for interlisted stocks. We are able to construct a composite score indicator (SCORE), combining various fundamental and market metrics, which enables us to predict future stock returns and separate the winners from the losers among value stocks. Results are stronger for interlisted than noninterlisted stocks. It is not clear, however, whether the SCORE indicator performance is linked to risk as evidence is inconclusive.
Abstract: Using AMEX, NASDAQ and NYSE stock market data for the period 1985-2006, this paper sheds further light into the value premium and the discussion of whether the value premium is driven by risk or behavioral factors. The paper utilizes a more comprehensive set of data and tests than previous studies and a research methodology that minimizes potential data snooping problems and confounding inferences. We document a consistently strong value premium in all markets examined, which persists in both bull and bear markets, as well as in recessions and recoveries. We show that the value premium is not driven by a few outliers, but it is pervasive as the overwhelming majority of stocks in the value portfolio have positive returns, and the majority of the industries in our sample have positive value premiums. The value premium, in general, remains positive and statistically significant over time. Our results are consistent with, but, in general, stronger than, those of other US studies. Previous studies’ results seem to be driven primarily by AMEX and NYSE stocks, as NASDAQ stocks experience much stronger value premium than other markets. In terms of explaining the drivers of the value premium, having looked at this question from many angles, we conclude that the evidence is mixed. It seems that both risk and mispricing may play a role in explaining the value premium, although the scale of the evidence seems to tilt more to the side of mispricing. The paper’s conclusions both with regards to the value premium and its drivers hold up well to various robustness tests.
Abstract: The purpose of this article is first to examine whether a value premium exists following a mechanical screening process (i.e., the search process) in the Canadian markets between two distinctly different periods,19851999 and 19992007, and second whether value investors add value in the stock selection process by being able to find truly undervalued stocks from the universe of the possibly undervalued stocks identified from the search process. We find that a strong and pervasive value premium exists in Canada over our sample periods that persists in bull and bear markets and during recessionsrecoveries. Value stocks, on average, beat growth stocks even when using the very mechanical screening of the search process. Furthermore, this article demonstrates that value investors do add value, in the sense that their process of selecting truly undervalued stocks, via in-depth security valuation of the possibly undervalued stocks and arriving at their investment decision using the concept of 'margin of safety', produces positive excess returns over and above the naive approach of simply selecting low PEPBV ratio stocks. The article was extended to the years of the 'great recession' (20082009) and despite the fact that over this extended period we had a severe recession and bear market, on average, the sophisticated portfolio still beat the naïve value portfolio, consistent with earlier evidence.
Abstract: Employing data from each of the three US stock markets separately, namely, AMEX, NASDAQ and NYSE, over the period 1985-2006, the paper finds that both value and growth stocks exhibit seasonal strength in January and the first half of the year, but the effect is stronger for the value stocks. In the second half of the year, however, the opposite is true. Growth stocks exhibit weaker performance than value stocks. Seasonality is also observed in the value premium. There is no evidence that NASDAQ stocks drive the results. The findings, which are pervasive across all markets examined, are consistent with the gamesmanship hypothesis and portfolio rebalancing by professional portfolio managers. However, they are not consistent with the argument that it may be higher risk that drives the outperformance of value stocks. This is because while portfolio managers seem to rebalance aggressively into value stocks at the beginning of the year, they switch out of growth stocks more aggressively in the second half of the year, thus negating the argument that value stocks bear more risk that growth stocks. Finally, the paper shows that the difference we observe in value and growth stock return seasonality is not driven by size, but it is rather a pure value effect.
