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Performance of Value and Growth Stocks in the Aftermath of the Global Financial Crisis

Author

Listed:
  • Bevanda Lea-Marija

    (Proventis Partners GmbH, Munich)

  • Zaimović Azra

    (The University of Sarajevo, School of Economics and Business)

  • Arnaut-Berilo Almira

    (The University of Sarajevo, School of Economics and Business)

Abstract

Background: Due to strong empirical evidence from different markets, existence of value premium became a financial theory standpoint. Although previous studies found that value stocks beat growth stocks in bearish and bullish markets, during the GFC, value stocks underperformed growth stocks. Objectives: This paper aims to examine the performance of value and growth stock portfolios after the GFC. Subjects of our analysis are constituent companies of the DJIA index, out of which portfolios of large-cap value and growth stocks have been constructed and evaluated. Methods/Approach: We measure the performance of stock portfolios, which are created based on the naïve diversification rule and random weighting approach. Statistical testing includes Levene’s homogeneity test, the Mann-Whitney U test, T-test, and the One-Sample T-test. Results: Growth stock portfolios outperform value stock portfolios after the GFC. The dominance of growth stock portfolios compared to value stock portfolios is significant, and the value premium disappears. Conclusions: Financial theory and investment management implications show that growth stocks have overtaken the dominance over value stocks since 2009. Causes might be in (1) expansionary monetary policy characterized by very low long-term interest rates and (2) high performance of the tech industry to which most growth stocks belong.

Suggested Citation

  • Bevanda Lea-Marija & Zaimović Azra & Arnaut-Berilo Almira, 2021. "Performance of Value and Growth Stocks in the Aftermath of the Global Financial Crisis," Business Systems Research, Sciendo, vol. 12(2), pages 268-283, December.
    • Handle: RePEc:bit:bsrysr:v:12:y:2021:i:2:p:268-283:n:1
    DOI: 10.2478/bsrj-2021-0032
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    References listed on IDEAS

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    More about this item

    Keywords

    value premium; Dow Jones Industrial Average; investment strategies; naïve diversification;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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