Value versus Growth on the Dhaka Stock Exchange: Risk- Return Relationship

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Author	Dr. M. Serajur Rasul
ISSN	2307-2466
On Pages	439-452
Volume No.	2
Issue No.	6
Issue Date	October 01, 2020
Publishing Date	October 01, 2020
Keywords	value stocks, growth stocks, value premium, risk, price/earnings ratio, price/book value ratio

Abstract

This paper examines the risk-return relationship in Dhaka Stock Exchange during 2000- 2009. The P/E and the P/B ratios are used to classify value and growth stocks. The risk-return relationship is positive and statistically significant for P/E sorted portfolios. However P/B sorted portfolios cannot be satisfied the positive risk-return relationship. The value stocks portfolio is less risky but produces higher returns than that of growth stocks portfolio. This paper sheds light on the discussion of efficiency of value stocks portfolio and growth stocks portfolio and also their risk -adjusted performance. The study found that value stocks portfolio is more efficient than that of growth stocks portfolio. The risk �adjusted performance of value stocks portfolio is better than that of growth stocks portfolio i.e. value stocks portfolio outperforms growth stocks portfolio. However, the paper shows that a P/E based search process does a better job of identifying value stocks and arriving at more consistent and sizeable value premium than does a search process based on P/B ratio in the Dhaka Stock Exchange during the study period.

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