Value versus growth: Taiwan evidence
Abstract
Purpose
The purpose of this paper is to use a stochastic dominance test to examine the relative performance of value vs growth stocks based on multiple value-growth proxies in the Taiwan stock market.
Design/methodology/approach
This work examines whether the return distribution of a value portfolio stochastically dominates that of a growth portfolio using a test proposed by Linton et al. (2005).
Findings
By applying stochastic dominance analysis on the full-sample period, the sub-sample period and the state of the world’s economic conditions, the authors find that the earnings-to-price or dividend-to-price ratio is better than the book-to-market ratio as a value-growth proxy in Taiwan. There are robust results even after adjusting for data frequency, a sampling method and sample excluding financial services.
Originality/value
This study makes the first attempt to examine value vs growth strategies based on multiple value-growth proxies in the emerging market of Taiwan by administering the stochastic dominance test.
Keywords
Acknowledgements
JEL Classification — G11, G14
The authors thank the Editor, Don Johnson and two anonymous referees for their helpful comments. The authors are grateful to Dr Andrew Szanajda and Mr Elon at the writing center of the Feng Chia University. Finally, Dr Hsu would like to thank the Ministry of Science and Technology, Taiwan for the financial support (MOST 103-2811-H-035-002).
Citation
Hsu, C.-H., Lee, K.-C., Chang, Y.-P. and Fung, H.-G. (2015), "Value versus growth: Taiwan evidence", Managerial Finance, Vol. 41 No. 8, pp. 845-856. https://doi.org/10.1108/MF-07-2014-0202
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited