CFA Institute, the global association of investment management professionals, has named the winners of the 2018 Graham and Dodd Awards of Excellence. Every year, a research article published in the CFA Institute Financial Analysts Journal receives the prestigious Graham and Dodd (G&D) Award to recognize the contribution of the research to the practice of investment management. The article “Buffett’s Alpha” by Andrea Frazzini, David Kabiller, CFA, and Lasse Heje Pedersen of AQR Capital Management has won the Top Award for 2018.
Published in the Fourth Quarter 2018 issue of the Financial Analysts Journal, the article suggests that Warren Buffett’s returns are neither luck nor magic but instead a reward for leveraging cheap, safe, high-quality stocks. The piece attempts to explain the remarkable performance of Buffett’s Berkshire Hathaway portfolio by analyzing and compiling stock returns, mutual fund data, holdings data, SEC reports, and even hand-collected comments from Berkshire Hathaway’s annual reports.
“It is fitting that an article about Buffett, Benjamin Graham’s most famous student and a strong advocate of his value investing approach, is this year’s Top Award winner, bringing the award back full circle to the well-respected principles of Graham and David Dodd,” said Heidi Raubenheimer, CFA, managing editor of the Financial Analysts Journal at CFA Institute. “Andrea Frazzini, David Kabiller, and Lasse Heje Pedersen did an outstanding job of thoroughly dissecting Buffett’s approach and analyzing what is truly at the heart of Berkshire Hathaway’s long-term success. Their findings confirm the ‘practical implementability of academic factor returns’: Berkshire Hathaway’s systematic exposure to value and quality factors can be mimicked and realized by others. Their analysis demonstrates the further improvement of the fund’s performance by its successful use of its unique access to high-quality, cheap leverage.”
In addition to the Top Award, the G&D Awards Committee honored “Hedge Funds and Stock Price Formation” by Charles Cao, Yong Chen, William N. Goetzmann, and Bing Liang with a Scroll Award. The article was originally published in the Third Quarter 2018 issue of the Financial Analysts Journal and concerns stock mispricing implied by both hedge fund ownership and trading.
The annual G&D Awards of Excellence include the Top Award to recognize the best research article and up to two Scroll Awards to acknowledge the runners-up. Winners are chosen through a two-stage selection process. First, all members of the Financial Analysts Journal Advisory Council and Editorial Board are invited to vote, producing a shortlist of practitioner-relevant research articles published in the Financial Analysts Journal throughout the year. Second, the G&D Awards Committee (six members selected from the CFA Institute Board of Governors, the CFA Institute Leadership Team, CFA Society leadership, and the Financial Analysts Journal editorial team) collectively decide the award winners from the shortlist.