Growth and Value Investment Strategy Applied on Chosen Stocks of the New York Stock Exchange
Keywords:Investment strategy, growth investment strategy, value investment strategy, Sharpe ratio, Jensen’s alpha, Information ratio
AbstractPurpose of the article: Nowadays, investors use many investment strategies. They can realize different profits using different strategies because of different principles of strategies. Author assesses two investment strategies. Calculating different financial indicators leads to comparison of yield and risk of indexes related to these strategies. Presented results could be important for investors within their investment decision in order to create investment portfolio. Methodology/methods: Growth and value investment strategies are theoretically described and applied in real data within 2008–2012. Using the CAPM model, author divides stocks of the NYSE included in the base of the DJIA into growth stocks and value stocks. Author compares index trends in charts, interpolates individual index charts by trend line and calculates financial indicators. Scientific aim: The aim of the article is to assess growth and value investment strategies which are applied to chosen stocks traded on the NYSE within 2008–2012. Author compares yield and risk of growth index with yield and risk of value index and DJIA index. Findings: Author applies growth and value investment strategies to chosen stocks. Sharpe ratio of indexes within whole period 2008–2012 is negative, whereas Jensen’s alpha is positive. Information ratio is positive only within 2008. Value investment strategy has lead to higher yield than growth investment strategy since October 2010, whereas before this month values had not been so different, but rather similar. Risk of value index is higher than risk of growth index and smaller than risk of DJIA index within each year of whole period 2008–2012. Conclusions: Similarly to results of empirical studies cited in this article, results of author indicate that value stock yields are higher than growth stock yields. Based on assessment of these investment strategies, investors could use results when they are making investment decision.
ORIGINAL SCIENTIFIC ARTICLE