Graham Number Timing Across 14 Global Exchanges: Where Does Value Work?

We tested Benjamin Graham's 1949 intrinsic value formula across 14 global stock exchanges over 25 years (2000-2025). The results reveal a clear pattern: value timing works in 8 of 14 markets, with strongest performance in developed value markets (Sweden, US, Germany, UK) and select emerging markets (India, China).

Contents

1. The Formula
2. Results Overview: 14 Exchanges Ranked
3. Key Geographic Insights
4. Where Graham Timing Excels
5. Where Graham Timing Struggles
6. The Down-Capture Story
7. Cash Periods: Signal Availability
8. Regional Insights
9. North America
10. Europe
11. Asia (Developed)
12. Asia (Emerging)
13. Southeast Asia
14. When to Use Graham Timing by Market
15. The Academic Foundation
16. Key Takeaways
17. Methodology

The surprise: high-growth Asian markets (Taiwan, Thailand, Korea) consistently underperformed. When markets chase growth and ignore valuations, Graham's defensive value screen misses the rally.

The Formula

Graham's fair value equation:

Graham Number = sqrt(22.5 × EPS × Book Value Per Share)

Where: - EPS = Net Income / Shares Outstanding - BVPS = Total Stockholders' Equity / Shares Outstanding - 22.5 = Graham's constant (P/E of 15 × P/B of 1.5)

The signal: Buy stocks where Price/Graham < 1.0

When a stock trades at 80% of its Graham Number, you're buying intrinsic value at a 20% discount.

Results Overview: 14 Exchanges Ranked

Benchmark: SPY 8.01% CAGR | All excess returns vs SPY

Winners: 8 of 14 exchanges beat SPY (57% success rate)

Key Geographic Insights

Where Graham Timing Excels

1. Developed value markets (Sweden, US, Germany, UK)

These markets share common traits: - Strong corporate governance - Transparent financial reporting - Defensive sector mix (industrials, consumer staples, utilities) - Mature economies where value cycles matter

Sweden's 0.544 Sharpe (best globally) reflects Nordic corporate quality. US's 0% cash (fully invested) shows Graham signals always fire in deep, liquid markets. Germany's 87.8% down-capture means you capture most losses, but the 1.86% excess still justifies the strategy.

2. Select emerging markets (India, China)

India's +5.43% excess (best globally) benefits from: - Lower market efficiency (mispricing persists longer) - Strong GDP growth (6-8% CAGR over period) - 57.1% down-capture (excellent downside protection)

China's +2.11% excess with 41.7% down-capture (best globally) shows defensive positioning works even in volatile A-share markets.

3. Resource economies with quality filters (Canada, Japan)

Canada's +1.15% excess with 45.8% down-capture reflects defensive positioning in a resource-heavy economy. Japan's +1.03% excess confirms Graham's formula works in low-growth, value-oriented markets.

Where Graham Timing Struggles

1. High-growth Asian markets (Taiwan, Thailand, Korea)

Taiwan: -3.13% excess, 28.2% cash Thailand: -2.73% excess, 20.4% cash Korea: -0.57% excess, 21.4% cash

These markets chase growth, not value. When electronics exporters (Taiwan), tourism (Thailand), and tech conglomerates (Korea) command premium valuations, Graham's defensive screen misses the rally.

The 20-28% cash periods confirm: in growth-driven markets, few stocks trade below intrinsic value based on earnings and book value alone.

2. Switzerland (mature, expensive)

Switzerland's -3.01% excess with 20.4% cash reflects a market where quality commands persistent premiums. Nestle, Roche, and Novartis rarely trade below Graham Number, they're perpetually expensive because they're perpetually good.

3. Indonesia (high cash drag)

Indonesia's 43.7% cash (highest globally) means the signal fires only 56% of the time. When invested, down-capture is excellent (25.0%), but the cash drag kills alpha. Thin universe + quality filters = too few stocks qualify.

The Down-Capture Story

Best downside protection: - China: 41.7% (captured only 42% of SPY's losses) - Canada: 45.8% (captured only 46% of losses) - India: 57.1% (captured only 57% of losses)

Worst downside protection: - US: 88.8% (captured 89% of losses, momentum exposure) - Hong Kong: 87.7% (captured 88% of losses) - Germany: 87.8% (captured 88% of losses)

The pattern: defensive emerging markets (China, India) and resource economies (Canada) dodge crashes better than momentum-driven developed markets (US, Hong Kong, Germany).

Cash Periods: Signal Availability

Always invested (0% cash): - US, UK, Canada

Deep, liquid markets with 3,000+ stocks always have 30+ qualifying stocks below Graham Number.

Moderate cash (10-20%): - Sweden (12.6%), Japan (13.6%), Hong Kong (12.6%), India (17.5%), China (20.4%), Thailand (20.4%), Switzerland (20.4%), Korea (21.4%)

Signals fire 80-90% of the time. Cash periods reflect overheated markets when valuations stretch.

High cash (>25%): - Taiwan (28.2%), Indonesia (43.7%)

Signals fire only 56-72% of the time. Thin universe + growth premiums = few value opportunities.

Regional Insights

North America

US: Best developed market (+4.39%), but high down-capture (88.8%) means momentum risk Canada: Defensive resource play (+1.15%, 45.8% down-capture)

Europe

• Sweden: Best risk-adjusted (0.544 Sharpe, +4.97%)
• Germany: Solid alpha (+1.86%) despite high down-capture (87.8%)
• UK: Steady performer (+1.47%, 0% cash)
• Switzerland: Premium valuations = persistent underperformance (-3.01%)

Asia (Developed)

Japan: Mature value market (+1.03%, 65.4% down-capture) Hong Kong: Borderline (-0.38%, high down-capture 87.7%)

Asia (Emerging)

• India: Best globally (+5.43%, 57.1% down-capture)
• China: Excellent downside protection (+2.11%, 41.7% down-capture)
• Taiwan/Thailand/Korea: Growth > value = persistent underperformance

Southeast Asia

Indonesia: Thin universe = high cash drag (-1.82%, 43.7% cash)

When to Use Graham Timing by Market

Recommended markets (positive excess, reasonable cash): - India: Best alpha, excellent down-capture (accept 17.5% cash drag) - Sweden: Best risk-adjusted (0.544 Sharpe) - US: Highest CAGR, always invested (accept 88.8% down-capture) - Germany/UK: Solid alpha in European value markets - China: Best downside protection (41.7% down-capture) - Canada/Japan: Defensive positioning in mature markets

Avoid (persistent underperformance or high cash drag): - Taiwan/Thailand/Korea: Growth markets don't reward value timing - Switzerland: Quality premiums persist, signals rarely fire - Indonesia: 43.7% cash drag kills alpha - Hong Kong: Borderline (-0.38%), high down-capture (87.7%)

The Academic Foundation

Benjamin Graham (1949): The Intelligent Investor introduced the Graham Number as a conservative valuation metric for defensive investors.

Fama & French (1998): "Value Versus Growth: The International Evidence" showed value stocks outperformed growth stocks in 12 of 13 international markets, earning 7.68% annual premiums on average.

Our results confirm Fama-French's global value premium exists in 8 of 14 markets (57%), but with crucial geographic nuance: value works best in developed markets with value-oriented cultures (Sweden, US, Germany, UK) and emerging markets with lower efficiency (India, China).

Asness, Moskowitz, Pedersen (2013): "Value and Momentum Everywhere" showed value strategies work across asset classes and geographies, though premiums vary by market structure.

The down-capture variance (41.7% in China vs 88.8% in US) confirms Asness et al.'s finding that value's defensive characteristics vary by market. Emerging markets with less momentum exposure show better downside protection.

Key Takeaways

What worked globally: - 8 of 14 markets beat SPY (57% success rate) - India best (+5.43%), Sweden best risk-adjusted (0.544 Sharpe) - Down-capture ranges 25-89% (strategy dodges crashes in emerging markets)

What didn't work: - High-growth Asian markets (Taiwan -3.13%, Thailand -2.73%, Korea -0.57%) - Premium valuation markets (Switzerland -3.01%) - Thin universe markets (Indonesia 43.7% cash)

• Geographic strategy: -
• Developed value markets: Use Graham timing in Sweden, US, Germany, UK -
• Emerging markets: India and China show best results -
• Growth markets: Avoid Taiwan, Thailand, Korea (value doesn't work)

Portfolio construction across markets: - Overweight: India (best alpha) + Sweden (best Sharpe) + US (always invested) - Underweight: Taiwan/Thailand/Korea/Switzerland (persistent underperformance)

Methodology

• Universe: 14 global exchanges (NYSE/NASDAQ/AMEX, BSE/NSE, XETRA, LSE, TSX, JPX, STO, SHH/SHZ, HKSE, KSC, TAI, SET, SIX, JKT)
• Period: 2000-01-01 to 2025-10-01 (103 quarters, 25 years)
• Signal: Price < Graham Number (sqrt(22.5 × EPS × BVPS))
• Quality filters: ROE > 10%, Net Income > 0, Total Equity > 0, market cap thresholds per exchange
• Portfolio: Top 30 stocks by deepest discount to Graham Number, equal weight
• Rebalancing: Quarterly (Jan/Apr/Jul/Oct)
• Transaction costs: Exchange-specific models (5-15 bps round-trip)
• Currency: Local currency returns (INR for India, SEK for Sweden, USD for US, etc.)
• Benchmark: SPY total return (for global comparison)

Full backtest code: github.com/ceta-research/backtests/graham-timing

Part of a Series: US | Sweden | India | Global | US | Switzerland | Sweden | Japan

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Data: Ceta Research | FMP fundamental data warehouse | 14 exchanges, 25-year backtest (2000-2025)