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Growth stocks outperform value stocks over the long term

Author

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  • N Beneda

    (University of North Dakota College of Business and Public Administration)

Abstract

Previous studies have generally found that returns on growth stocks, or stocks with high price-to-earnings (P/E) ratios, often lag behind those of value stocks, or stocks with low-P/E ratios. This study examines the long-term (up to 18 years) performance of growth stocks versus value stocks when a buy-and-hold strategy is adhered to. The study examines the performance of growth versus value stocks of portfolios created during the period 1983–7. The findings of this study indicate that the long-term performance (14+ years) of growth stocks is higher than the long-term performance of value stocks for portfolios created during the years included in this study. After only five years, however, the growth stocks lagged behind the value stocks. These results tend to support the efficient market hypothesis.

Suggested Citation

  • N Beneda, 2002. "Growth stocks outperform value stocks over the long term," Journal of Asset Management, Palgrave Macmillan, vol. 3(2), pages 112-123, September.
    • Handle: RePEc:pal:assmgt:v:3:y:2002:i:2:d:10.1057_palgrave.jam.2240070
    DOI: 10.1057/palgrave.jam.2240070
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    Cited by:

    1. Salim Chahine, 2008. "Value versus growth stocks and earnings growth in style investing strategies in Euro-markets," Journal of Asset Management, Palgrave Macmillan, vol. 9(5), pages 347-358, December.
    2. Chiao Yi Chang & Hsiang-Lan Chen & Wen-Hsiu Kuo, 2017. "The Analysis of 52-Week High Investing Strategy Based on Herding Behavior," International Review of Finance, International Review of Finance Ltd., vol. 17(1), pages 77-106, March.
    3. Gerardo “Gerry” Alfonso Perez, 2017. "Value Investing in the Stock Market of Thailand," IJFS, MDPI, vol. 5(4), pages 1-12, November.
    4. Hani Rohuma, 2023. "Value Stocks versus Growth Stocks: An Examination of Bursa Malaysia," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 143-151, July.
    5. Monge, Manuel & Lazcano, Ana & Parada, José Luis, 2023. "Growth vs value investing: Persistence and time trend before and after COVID-19," Research in International Business and Finance, Elsevier, vol. 65(C).

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