The returns for value and growth investing

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School of Business | Bachelor's thesis
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Authors

Date

2022

Department

Mikkelin kampus

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Mcode

Degree programme

(Mikkeli) Bachelor’s Program in International Business

Language

en

Pages

38+1

Series

Abstract

Objectives The main objectives of this thesis is to study the differences in the returns of value and growth investing for the American stock market for 2000 to 2020. Additionally, the risk adjusted returns are also studied. The last objective is to analyze these returns using descriptive and inferential statistical methods. Summary This study creates value and growth portfolios based on Book to Price and Earnings to price. The top 30% of these portfolios is classified as growth stocks, bottom 30% as value and the middle 40% is excluded. The monthly, yearly, 5-year, 10-year holding periods are studied. The stock returns are analyzed using chart returns, descriptive statistics, Sharpe ratio. To statistically test the significance of the findings t tests and regression against the Capital asset pricing model is conducted. Conclusions The descriptive statistics shows that value on average has returned a higher return than growth, however that seems to be decreasing in the second half. In accordance with the t test, the null hypothesis could not be rejected. This means that there is no statically significant difference between the means of value and growth portfolios for both multiples. Based on the regression, the null for only one hypothesis is rejected: P/B multiple for growth stocks. The null for three other hypothesis is retained. The CAPM is able to explain the excess returns of these three portfolios. Overall, neither value nor growth has outperformed the other for the period under study.

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Thesis advisor

Stepanov, Roman

Keywords

asset pricing model, style investing, value investing, growth investing, capital asset pricing model, investing, stock market, finance

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Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-202205153136

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[kand] Kauppakorkeakoulu / BIZ