University of Oulu

Identifying the role of expectation errors in value glamour return using Fscore

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Author: Ruman, Asif1
Organizations: 1University of Oulu, Oulu Business School, Department of Finance, Finance
Format: ebook
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 1 MB)
Pages: 61
Persistent link:
Language: English
Published: Oulu : A. Ruman, 2014
Publish Date: 2014-04-28
Thesis type: Master's thesis
Tutor: Perttunen, Jukka
Reviewer: Perttunen, Jukka
Joenväärä, Juha
Existing literature documents that a portfolio of value stocks outperforms a portfolio of glamour stocks and market portfolio. Researchers have different opinions regarding, “what derives premium returns from a long short value glamour strategy?” The central objective of this paper is to seek the source of value glamour return effect. We have mix results for various hypotheses tested. Our main findings are: European stocks have extremely negative performance for long short value glamour strategy during 1991 and 2011, second, Fscores effectively separate potential winners from potential losers, third, error in investor expectations partially affect the performance of value glamour strategy but central source of value glamour performance is the riskiness of value stocks in comparison to risk levels of overall market or glamour stocks and lastly, investor sentiments do amplify future returns providing partial evidence in favor of market mispricing. We conclude that successful value investing requires ability to pick quality stocks from within a broader portfolio and exposure to higher risk.
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Copyright information: © Asif Ruman, 2014. This publication is copyrighted. You may download, display and print it for your own personal use. Commercial use is prohibited.