Thursday, May 26, 2011

Low Price Anomaly

Here's an interesting link to an old article on how low priced stocks performed on the Johannesburg stock exchange: not well. So what? Well, it collects some papers on the U.S. stock exchanges showing that low priced stocks outperformed higher priced counterparts over time. My analysis of my own portfolios has led me to conclude that you're generally better off buying lower priced stocks. And I mean under $10, or better yet under $5. The phenomenon is apparently well known in the literature and it's called the "low price anomaly."

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