Style investing, comparing value, growth, large-cap and small-cap portfolios, evidence from the Finnish Stock Market

Abstract

The purpose of this thesis is to study the performance of large-cap versus small-cap and value versus growth asset portfolios in the Helsinki Stock Exchange during the 2002-2006 period. The basic idea is to find out whether different investment style portfolios have gained different returns during the study period and whether the possible difference in returns could be considered to be statistically significant. The companies included in the study were first split into two separate portfolios of large-cap and small-cap stocks based on firms’ market capitalization value. This made the comparison of the performances between large- and small-cap stocks possible. The whole group of companies was also split into two separate portfolios of value and growth stocks based on firms’ market-to-book value of equity. This made the comparison of value and growth stocks possible. After that the size portfolios were divided further into value and growth portfolios. The portfolios were called small-cap value portfolio, small-cap growth portfolio, large-cap value portfolio and large-cap growth portfolio. First descriptive analysis was conducted. Conclusions from the descriptive analysis were that value had outperformed growth style and large-cap portfolio had outperformed small-cap portfolio in the Finnish equity market during the study period. T-test was used to find out whether these differences were statistically significant. None of the portfolio pairs’ annual or quarterly returns differed from each other statistically. Finally the statistical significance of the difference between the market portfolio and value vs. growth, large-cap vs. small-cap, large-cap value vs. large-cap growth and small-cap value vs. small-cap growth were examined. No statistically significant difference was found.