Based on a sample of German stocks listed at the Frankfurt stock exchange, the study investigated the ability of hedge portfolio formation structures, built of three value premium proxies (P/B, P/E, and DY), the size factor, and the technical momentum factor, to generate excess returns in the period 1992 to 2011. The P/B hedge portfolio yields an average return of 1.59 percent per month, the P/E hedge portfolio 0.664 percent, and a portfolio formation approach ranked on DY delivers a return of 0.839. The results of multivariate regressions favor the Fama-French three-factor model in order to explain expected stock returns.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Motivation
- Structure and objective
- Conceptual definitions
- Value investing
- Growth investing
- Links between value and growth investing
- Asset pricing theories
- Capital Asset Pricing Model
- Risk-free interest rate
- Market risk premium
- Beta factor
- Criticism and extensions
- Fama and French three factor model
- Explanation approaches for the value premium
- Carhart four factor model
- Capital Asset Pricing Model
- Determinants of expected stock returns
- Price-to-book
- Price-to-earnings
- Dividend yield
- Size
- Momentum
- Further determinants
- Empirical studies for the German market
- Own empirical analysis
- Data and methodology
- Descriptive statistics
- Seasonality
- Univariate and multivariate regressions
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This master's thesis aims to empirically analyze the difference in performance between value and growth investing strategies in the German stock market. The author investigates the determinants of expected stock returns and examines if the well-known value premium is also present in the German market. Key themes of the thesis include:- Value investing vs. Growth investing strategies
- The role of asset pricing models (CAPM, Fama-French, Carhart) in explaining stock returns
- The relationship between various firm characteristics and stock returns
- Empirical analysis of the German stock market
- The existence of the value premium in the German context
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the topic of value vs. growth investing and outlines the motivation and structure of the thesis. It also clarifies the objectives of the analysis.
- Conceptual definitions: This chapter defines value investing and growth investing, highlighting their core principles and strategies. It also explores the relationship between these two approaches.
- Asset pricing theories: This chapter delves into several prominent asset pricing models, including the CAPM, Fama and French three factor model, and the Carhart four factor model. The chapter discusses the models' assumptions, strengths, and limitations.
- Determinants of expected stock returns: This chapter examines key determinants of stock returns, such as price-to-book ratio, price-to-earnings ratio, dividend yield, firm size, and momentum. The impact of these factors on stock returns is analyzed.
- Empirical studies for the German market: This chapter reviews existing empirical studies on value and growth investing in the German market, providing a contextual framework for the author's analysis.
- Own empirical analysis: This chapter describes the data and methodology used in the author's own analysis. It presents descriptive statistics of the data and examines seasonality effects. The chapter also details the results of univariate and multivariate regressions.
Schlüsselwörter (Keywords)
This master's thesis focuses on value and growth investing strategies, asset pricing models, determinants of stock returns, empirical analysis of the German stock market, and the existence of the value premium. The research utilizes data from the German stock market to test hypotheses and draw conclusions about the performance of different investment strategies.
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- Christian Schießl (Author), 2012, Value Stocks beat Growth Stocks: An empirical Analysis for the German Stock Market, Munich, GRIN Verlag, https://www.grin.com/document/202583
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