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Volume 13 | Issue 9 | Year 2026 | Article Id. IJEMS-V13I9P101 | DOI : https://doi.org/10.14445/23939125/IJEMS-V13I9P101

A Critical Exploratory Study on the Method of Value Investing (Warren Buffett's Portfolio Management Strategy) as Opposed to Diversified Quantitative Models of Modern Portfolio Theory

Arav Khanna

Received Revised Accepted Published
17 Jul 2026 21 Aug 2026 10 Sep 2026 29 Sep 2026

Citation :

Arav Khanna, "A Critical Exploratory Study on the Method of Value Investing (Warren Buffett's Portfolio Management Strategy) as Opposed to Diversified Quantitative Models of Modern Portfolio Theory," International Journal of Economics and Management Studies, vol. 13, no. 9, pp. 1-16, 2026. Crossref, https://doi.org/10.14445/23939125/IJEMS-V13I9P101

Abstract

Modern Portfolio Theory and Value Investing are widely treated as competing investment frameworks, with debate centering on which delivers superior risk-adjusted returns. This paper challenges that framing, arguing that the two are not rival frameworks, but complementary tools applied at different stages of the investment process. It compares how each framework defines risk, diversification, and portfolio construction, drawing on a conceptual review of the literature and case studies of leading practitioners — Warren Buffett and Peter Lynch as value investors, and Ray Dalio's Bridgewater and Dimensional Fund Advisors as quantitative, MPT-based managers. To test whether this complementarity holds in practice, the study conducts a primary survey on Indian investment practitioners, including individual investors, fund managers, and wealth advisors. The findings indicate that pure forms of either framework are rarely practiced: institutional approaches retain MPT's mathematical framework while building on it with factor models and risk parity. Most surveyed practitioners reported using a combination of both philosophies — MPT to guide portfolio construction and diversification, and value investing’s margin-of-safety concept to select individual securities. Practitioners tilt towards the value investing definition of risk as permanent loss of capital rather than volatility, as in MPT, and most consider markets to be only moderately efficient. The study concludes that an optimal approach for investors lies not in choosing between the frameworks but in pragmatic diversification using the two, offering insights highly relevant to retail and emerging-market investors navigating between these methods themselves.

Keywords

Diversification, Modern Portfolio Theory, Risk, Portfolio Construction, Value Investing.

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