THE PERFORMANCE OF MODIFIED GRAHAM-BUFFET INVESTING: A COMBINATION MODEL OF FUNDAMENTAL AND TECHNICAL ANALYSIS

Abstract

Fundamental analysis and technical analysis are two different school of thoughts of analyzing stocks, that often investors perceive them as substitutes, one over the other. This research aims to explore the possibility of making investment strategy, which has superior performance measured by compounding return againts market indices, made from the combination of fundamental and technical analysis. The performance of the proposed strategy is recorded from 2008-2017 at Indonesia Stock Exchange using monthly holding period. The proposed model of investing strategy is created by using combination of Graham-Buffet fundamental analysis and technical analysis which represented by moving average, and called Modified Graham-Buffet Investing. The result shows that the proposed strategy is performing better with rate of return of 10725.92% or 107.25x of original capital compared to fundamental analysis alone, market indices, and mutual funds. This research implies that combining fundamental and technical analysis is possible and even earned higher return. Therefore, individual investors or portfolio managers should not perceive fundamental and technical analysis as substitutes, but complements, and any rational investors may decide to use Modified Graham-Buffet Investing as their investing strategy.