Taiwan Index Plus Is Going to Launch Value Investing Index

2018/05/24 14:00

Taiwan Index Plus Corporation(TIP), a fully subsidiary of the Taiwan Stock Exchange, is going to launch TIP Value Investing Index, which is also the first value factor index in Taiwan market.

Value investing targets on buying and holding undervalued stocks in order to receive extraordinary capital gains in the long run. According to the academic research, mean reversion suggests that prices and returns would eventually move back toward the mean or average, and P/E ratio of a company can be subject to this phenomenon. Therefore, by using mean reversion method, TIP Value Investing Index selects constituents with strong profitability and relatively low P/E ratios. In addition, the weighting of each constituent is decided by both value and size factors, which can ameliorate the disadvantages of traditional market-capitalization weighted indexes. 

From the 5-year back-testing result, Value Investing index has an astounding 91.73% return, compare to TAIEX’s 65.02%. What’s more, the 2017 dividend yield has reached 6.39%, which is much higher than 4.51% of TAIEX. These results can also prove that value stocks can outperform the market with excess returns. Such investment strategy is also promoted by high-profile investors like Warren Buffet and Benjamin Graham.

Published in TWD, the TIP Value Investing index is based on 5000 at the close trading date, November 11^th, 2017. The composition of the index is adjusted annually.

About the index