VALUE STRATEGIES IN FINLAND: Evidence from the Helsinki Stock Exchange 1990–2013
Tikkanen, Jarno (2014)
Tikkanen, Jarno
2014
Kuvaus
Opinnäytetyö kokotekstinä PDF-muodossa.
Tiivistelmä
The purpose of this paper is to study whether the value effect exists in Finland and whether the individual investor is able to earn abnormal returns using value investing strategies. In order to examine the value effect, value and growth portfolios are formed using the sorted values of E/P, B/P and CF/P ratios. Additionally, sorted values of EV/EBIT ratio and ROIC are used to form value and growth portfolios. In order to find out whether the individual investor is able to earn abnormal returns two additional strategies are employed. The first strategy uses sorted values of EV/EBIT ratio and ROIC to select stocks into portfolio. The second strategy uses the EV/EBIT and CF/P ratios and ROIC. Both of these portfolios consists of 10 stocks. The former strategy is called the MF-10 strategy, and the latter one the MF-CF strategy.
The sample includes stocks listed in the Helsinki Stock Exchange between 1990 and 2013. The portfolios were formed each year on the last trading day of June. The performance of portfolios were compared using standard portfolio performance measurement models including the Sharpe, Treynor and Sortino ratios. Additionally, three different models to measure abnormal returns of the MF-10 and MF-CF strategies are employed. Abnormal returns are measured using a market adjusted model, the Fama-French three-factor model and the Carhart four-factor model. The latter two are used in order to find out whether the returns of two separate value strategies are resulting from the size, value or momentum effect.
The results of the study show that the value effect exists in the Finnish stock market. Value stocks outperformed growth stocks also when the risk-adjusted models were applied. However, the difference between the returns of high and low B/P portfolios was smaller than earlier studies have showed. Finally, according to the empirical results, the two tested value strategies have provided abnormal returns. The average annual abnormal returns of the MF-CF strategy varied from 6.3% to 11.2% and they were statistically significant at 5% level. Abnormal returns of the MF-CF strategy were also positive and statistically significant when the transaction costs were taken into consideration.
The sample includes stocks listed in the Helsinki Stock Exchange between 1990 and 2013. The portfolios were formed each year on the last trading day of June. The performance of portfolios were compared using standard portfolio performance measurement models including the Sharpe, Treynor and Sortino ratios. Additionally, three different models to measure abnormal returns of the MF-10 and MF-CF strategies are employed. Abnormal returns are measured using a market adjusted model, the Fama-French three-factor model and the Carhart four-factor model. The latter two are used in order to find out whether the returns of two separate value strategies are resulting from the size, value or momentum effect.
The results of the study show that the value effect exists in the Finnish stock market. Value stocks outperformed growth stocks also when the risk-adjusted models were applied. However, the difference between the returns of high and low B/P portfolios was smaller than earlier studies have showed. Finally, according to the empirical results, the two tested value strategies have provided abnormal returns. The average annual abnormal returns of the MF-CF strategy varied from 6.3% to 11.2% and they were statistically significant at 5% level. Abnormal returns of the MF-CF strategy were also positive and statistically significant when the transaction costs were taken into consideration.