Value effect in Indian stock market: an empirical analysis Online publication date: Tue, 27-Mar-2018
by Vanita Tripathi; Priti Aggarwal
International Journal of Public Sector Performance Management (IJPSPM), Vol. 4, No. 2, 2018
Abstract: The value effect is the tendency of value stocks to outperform the growth stocks in the long-term. In this paper, we attempt to investigate the presence of value effect in the Indian stock market and compare the performance of various value stocks portfolios as compared to growth stocks portfolios and market portfolio using return and various risk-adjusted measures over the period 1999-2015. The different portfolios were formed on the basis of alternative valuation measures viz. price to book ratio (P/B), price to earnings ratio (P/E), dividend yield (D/P), cash flow yield (C/P), sales to price ratio (S/P) and enterprise value to PBDITA ratio (EV/PBDITA). Besides the conventional risk-adjusted measures, we have also used M2 measure and Fama's decomposition measure. We find that value effect is significant on unadjusted as well as risk-adjusted return basis. Further, we found that value investment strategy yields significant positive abnormal returns in Indian market.
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