Buffett’s Alpha Yale University（巴菲特的α耶鲁大学）.pdf

Buffett鈥檚 Alpha * Andrea Frazzini, David Kabiller, and Lasse Heje Pedersen First Draft: May 3, 2012 This draft: November 21, 2013 Abstract Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett鈥檚 leverage is about 1.6-to-1 on average. Buffett鈥檚 returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires鈥 portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett鈥檚 returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors. JEL Classification: G11, G12, G14, G22, G23 Keywords: market efficiency, leverage, quality, value, betting against beta * Andrea Frazzini and David Kabiller are at AQR Capital Management, Two Greenwich Plaza, Greenwich, CT 06830, e-mail: andrea.frazzini@; web: /~af227/ . Lasse H. Pedersen (corresponding author) is at New York University, Copenhagen Business School, AQR Capital Management, CEPR, and NBER; e-mail: lpederse@; phone: +1-203.742.3758; web: /~lpederse/. We thank Cliff