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Article

The Attractiveness of Investments in Listed German Family Firms: Reality or Deception Caused by Indexes Applying Backtest Data?

Michael B. Grelck, Stefan Prigge, Lars Tegtmeier and Mihail Topalov
The Journal of Investing Winter 2017, 26 (4) 89-104; DOI: https://doi.org/10.3905/joi.2017.26.4.089
Michael B. Grelck
is a managing director at Dr. Grelck Consulting GmbH in Hamburg, Germany. grelck@drg-ub.com
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Stefan Prigge
is a professor of corporate finance and corporate accounting at the HSBA Hamburg School of Business Administration and member of the Institute for Mittelstand and Family Firms in Hamburg, Germany. stefan.prigge@hsba.de
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Lars Tegtmeier
is a professor of general business administration and financial management at the Hochschule Merseburg in Merseburg, Germany. lars.tegtmeier@hs-merseburg.de
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Mihail Topalov
is a professor of finance at the FOM University of Applied Sciences in Essen, Germany, and managing director of TKL.Fonds Gesellschaft für Fondsconception und –analyse mbH in Hamburg, Germany. topalov@tkl-fonds.de
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Abstract

Taking the example of Germany, this article analyzes whether listed family firms are an asset class on their own with attractive diversification properties. Family firms have become increasingly popular since the most recent financial crisis because they are assumed to do business in a more honorable manner and with a longer-term perspective. Family firm research has collected some theoretical and empirical evidence substantiating that family firms could indeed behave differently compared with their non-family peers, thus supporting the expectation of attractive diversification properties. The empirical analysis applies available family firm stock indexes for an inexpensive quick check. At first sight, the results for the longest time series seem to support the premise that family firm shares indeed do have favorable diversification properties. However, they seem to have disappeared in the more recent time frame. The reason for this is unclear, as the practice of index providers to lengthen the time series of their indexes with simulated past performance based on the launch date portfolio might have also affected the results (survivorship bias), thus demonstrating the potential pitfalls of a quick check. Nevertheless, the findings of family firm research indicate that it could be worthwhile to go beyond this quick check. Recommendations as to how to advance the analysis of investments in listed family firms to the next level are provided.

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The Journal of Investing: 26 (4)
The Journal of Investing
Vol. 26, Issue 4
Winter 2017
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The Attractiveness of Investments in Listed German Family Firms: Reality or Deception Caused by Indexes Applying Backtest Data?
Michael B. Grelck, Stefan Prigge, Lars Tegtmeier, Mihail Topalov
The Journal of Investing Nov 2017, 26 (4) 89-104; DOI: 10.3905/joi.2017.26.4.089

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The Attractiveness of Investments in Listed German Family Firms: Reality or Deception Caused by Indexes Applying Backtest Data?
Michael B. Grelck, Stefan Prigge, Lars Tegtmeier, Mihail Topalov
The Journal of Investing Nov 2017, 26 (4) 89-104; DOI: 10.3905/joi.2017.26.4.089
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  • Article
    • Abstract
    • FAMILY FIRMS
    • WHY FAMILY FIRMS MIGHT BE DIFFERENT
    • PREVIOUS STUDIES OF FAMILY FIRMS’ STOCK RETURNS
    • THE POTENTIAL PITFALLS OF BACKWARD CALCULATION IN INDEX TIME SERIES
    • HYPOTHESES
    • DATABASE AND DESCRIPTIVE STATISTICS
    • METHODOLOGY
    • DISCUSSION
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
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