Does Buffett’s Value Investing Strategy Really Work Well, Especially During the 2020 Epidemic? Evidence from the American Stock Market

Rongzhen Wu, Yasmin Begum


Warren Buffett’s value investing strategy is famous around the world which is regarded as the key reason for his success. But due to the huge losses incurred by Buffett and Berkshire Hathaway during the 2020 epidemic, some people start to doubt the validity of the value investing strategy. Therefore, the research questions in this paper focus on the quantification, validity, and robustness of Buffett’s value investing strategy in the American stock market. Consequently, three results are drawn from this research: following the idea of Buffett’s value investing strategy, the B-score constructed by 6 sub-indexes can be used to quantify the stock’s value; the B-score had a decent ability to predict stock’s future returns from 2015 to 2019, which infers the validity of value investing strategy when the economy is booming; the B-score lost the ability to predict stock’s future returns in 2020, but this result is not adequate to deny the robustness of Buffett’s value investing strategy when facing the extreme situations like the 2020 epidemic for many reasons, which are discussed at the end of this paper.


Value Investing Strategy; Buffett; American Stock Market

Full Text:



Bali, Cakici and Whitelaw, 2011, “Maxing out: Stock as lotteries and the cross-section of expected returns”. [J]. Journal of Financial Economics, Vol.99, pp.427~446.

Bird, Ronald Geoffrey and Gerlach, Richard H., The Good and the Bad of Value Investing: Applying a Bayesian Approach to Develop Enhancement Models.

Chan, L.K.C., Lakonishok, J. and Sougiannis, T. (2001), The Stock Market Valuation of Research and Development Expenditures. The Journal of Finance, 56: 2431-2456.

Fama E. F. and J. D. MacBeth,1973, “Risk,Return, and Equilibrium: Empirical Tests”, Journal of Political Economy,Vol.81, pp. 607~636.

Fama, E.F. and French, K.R. (1992), The Cross‐Section of Expected Stock Returns. The Journal of Finance, 47: 427-465.

Frazzini A., D. Kabiller and L. H. Pedersen, 2013 “Buffett's Alpha” , National Bureau of Economic Research,Working Paper.

Hu Yi, Gu Ming.Alpha of Buffett: Empirical Study from Chinese Stock Market[J]. Journal of Management World, 2018, 34(08): 41-54+ 191. Ilie, F. (2020).

Considerations Regarding Financial Risk Management in Order to Maximize Earnings During the Coronavirus Epidemic, Scientific Bulletin, 25(1), 26-32.

Kong Lingling, Zhang Xinmin, Li Yinying. Analyses on Growing Companies’ Financial Statement And Future Stock Return—Empirical Study on Chinese Listed Companies [J]. Accounting Research, 2010(06): 37-43+95. Lakonishok, J., Shleifer, A. and VISHNY, R.W. (1994), Contrarian Investment, Extrapolation, and Risk. The Journal of Finance, 49: 1541-1578.

Lu Dayin, Lin Chendong, Liu Yuanhai. Study on The Determining Factors of Stock Future Returns [J]. Journal of Harbin Institution of Technology,2006(09):1537-1540+1548.Mark T. Soliman; The Use of DuPont Analysis by Market Participants. The Accounting Review 1 May 2008; 83 (3): 823–853.

Piotroski, Joseph D. “Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers.” Journal of Accounting Research, vol. 38, 2000, pp. 1–41.

DOI: http://dx.doi.org/10.18282/ff.v10i4.2349


  • There are currently no refbacks.