Value Versus Growth: Australian Evidence

36 Pages Posted: 4 May 2007 Last revised: 26 Dec 2007

See all articles by Philip Gharghori

Philip Gharghori

Monash University

Sebastian Stryjkowski

Monash University

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Multiple version iconThere are 2 versions of this paper

Date Written: November 2007


Fama and French (1992) and Lakonishok, Shleifer and Vishny (1994) show that value stocks earn substantially higher returns than growth stocks. Barbee, Mukherji and Raines (1996) and Leledakis and Davidson (2001) show that the ratio of sales-to-price and debt-to-equity are better predictors of average equity returns than book-to-market equity and firm size. In this paper, we evaluate the ability of size, book-to-market, sales-to-price, cash flow-to-price, earnings-to-price and debt-to-equity in explaining the cross-sectional variation in equity returns. Our findings show that sales-to-price, earnings-to-price and cash flow-to-price are highly significant in explaining cross-sectional variation in equity returns. However, book-to-market emerges as the best predictor of average equity returns, displaying the highest level of significance in joint regressions. In summary, we document that book-to-market is the best predictor of equity returns in Australia and thus is the best proxy for value/glamour.

Keywords: Multifactor Model, Book-to-market equity effect, Size effect

JEL Classification: G10, G11, G12, G15

Suggested Citation

Gharghori, Philip and Stryjkowski, Sebastian and Veeraraghavan, Madhu, Value Versus Growth: Australian Evidence (November 2007). Available at SSRN: or

Philip Gharghori (Contact Author)

Monash University ( email )

Wellington Road
Melbourne, 3800
+61399059247 (Phone)


Sebastian Stryjkowski

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Manipal, Karnataka 576104
+91-820-2701030 (Phone)

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