Style Investment: A Comparative Performance Analysis of Different Styles- Recent Evidence on FTSE250 Index
51 Pages Posted: 16 Dec 2019
Date Written: December 4, 2019
This is a unique attempt to compare the performance of multiple styles on a long term basis in FTSE250 market. Value and growth portfolios are classified with single variable sorting and dual variable sorting. Winner and loser portfolios are classified based on three year holding period abnormal returns. At the end of 24 years (1981-2004) book-to-market ratio based value-growth strategy provided highest cumulative returns, then from strategy based on EPS growth rate cum E/P ratio, contrarian profit and dividend yield in that sequence. Study finds that growth premium and momentum profits are not general features of UK stock market. Value and growth portfolios are similarly risky while loser portfolio is highly risky. Two-factor regression finds sorting variable related risk factor together with market risk can better explain the returns of the strategy.
Keywords: Value premium, Contrarian profit, Holding period returns
JEL Classification: G34, G12, G30
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