THE PERFORMANCE OF JAPANESE COMMON-STOCKS IN RELATION TO THEIR NET CURRENT ASSET VALUES

Benjamin Graham's NCAV model as an investment strategy appears to be w orking in the Japanese equity markets. In this study, net current asse t value is normalized by firm size and operationalized as (Current Ass ets-Total Liabilities)/Market Value of a firm abbreviated as NCAV/MV. Our results suggest that positive normalized NCAV portfolios tend to o utperform the market on a risk-adjusted basis in Japanese equity marke ts, even after controlling for any confounding P/E effects, but appear sensitive to the investor's holding period.