Value Versus Growth: Stochastic Dominance Criteria

30 Pages Posted: 2 Sep 2005

See all articles by Abhay Abhyankar

Abhay Abhyankar

MOVE,Departament d'Economia i d'Història Econòmica, Universitat Autònoma de Barcelona

Keng-Yu Ho

National Taiwan University - Department of Finance

Huainan Zhao

Loughborough University - School of Business and Economics

Date Written: September 2006

Abstract

In this paper, we investigate the value versus growth strategies from the perspective of stochastic dominance. Using half century US data on value and growth stocks, we find strong evidence that value stocks stochastically dominate growth stocks in all three-order of stochastic dominance relations over the full sample period as well as during economic boom (good) periods. However, there is no significant stochastic dominance relation between value and growth stocks during recession (bad) periods, which is inconsistent with the risk-based predictions but is better explained by behavioral models.

Keywords: Stochastic Dominance, Value Stocks, Growth Stocks, Value Premium

JEL Classification: D81, G11, G30

Suggested Citation

Abhyankar, Abhay and Ho, Keng-Yu and Zhao, Huainan, Value Versus Growth: Stochastic Dominance Criteria (September 2006). Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=793204 or http://dx.doi.org/10.2139/ssrn.793204

Abhay Abhyankar

MOVE,Departament d'Economia i d'Història Econòmica, Universitat Autònoma de Barcelona ( email )

Campus de Bellaterra-UAB Edifici B
Cerdanyola del Vallès
Barcelona, Catalunya 08193
Spain

HOME PAGE: http://https://www.movebarcelona.eu/index.php/people/alphabetical-directory

Keng-Yu Ho

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Huainan Zhao (Contact Author)

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

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