Abstract:
Growth and value stocks are two important subjects in capital
markets. First, these two stocks based on different variables such as
Estimation of their amount of risks and returns, circumstances of
obtaining returns at different periods in up and down market conditions
were realized in Tehran Stock Exchange. Then Growth stock with Value
Stock was compared through variables such as firm size, return and risk
premium. The results show that firm size is not suitable to realize
growth and value stock from each other. Also an investor by purchasing
the growth stock obtains the risk premium more than value stock in up
market and growth stocks returns are greater than value stock returns in
Tehran stock exchange.
Machine summary:
"In this research, growth and value stocks of Tehran Stock Exchange have been used in order to investigate that which of them a better performance in this market has based on three variables of size, risk premium and return.
Consequently, they found that in a high volatility market, "cheap value stocks" had a higher performance in comparison with "expensive growth stocks" in each level (Lakonishok, Schleifer & Vishny, 1994).
Jensen, Johnson & Mercer investigated the effect of size (market size) and P/B on firms’ stocks returns during 1965-1994 and found that both these factors will be important in the systematic risk and will affect the return.
The differences between growth and value stocks and the effective factors on them lead investors to use the modern financial knowledge in order to invest in stocks based on market conditions and time periods.
By concentrating the effect of growth and value stocks variables on firm size, risk premium and stocks’ return, correlation between return and risk premium were almost is equal over eight years.
Consequently, it can be concluded that growth and value stocks variable doesn’t have an important effect on the correlation between risk premium and return and correlation between firm size and stocks’ return.
in addition, portfolios of smaller firms with lower E/Ps have higher returns in comparison with larger firms with higher E/Ps. Jensen, Johnson & Mercer investigated the effect of size (market size) and P/B on firms’ stocks returns during 1965-1994."