Portfolio managers face the challenge to achieve excess returns comparative to a benchmark for their private or institutional clients. Researchers such as Fama and French (1992, 1996) or Lakonishok, Shleifer, and Vishny (1994) caused a stir with their findings that various investment styles tend to accomplish superior returns over a long-term horizon. Their findings proposed that value stocks tend to outperform growth stocks.
This bachelor thesis raises the question whether value or growth fund managers are able to achieve a persistent outperformance relative to their internal and external benchmark. The findings have a crucial influence on investors considering an investment into the equity market by an active or passive portfolio management approach.
Table of Contents
List of Abbreviations
List of Figures and Tables
1 Introduction
1.1 Problem Definition
1.2 Course of the Investigation
2 Techniques and Principles of Value and Growth Investing
2.1 Introduction and Characterisation of Value and Growth Investing
2.2 Instruments to Determine the Investment Style
2.2.1 Price-to-Earnings Ratio
2.2.2 Price-to-Book Value Ratio
2.2.3 Price-to-Cash Flow Ratio
2.2.4 Dividend Yield
2.3 Classification of Value and Growth Stocks and Funds
2.3.1 Classification in Theory by Researchers
2.3.2 Classification in Practice by Financial Data Providers
3 Performance Evaluation of Value and Growth Investing
3.1 Development of the Value Premium
3.2 Reasons for the Value Premium
3.2.1 Rational Explanation
3.2.2 Behavioural Explanation
3.2.3 Random or Chance Occurrence Explanation
4 Equity Fund Managers´ Capabilities to Generate Alpha
4.1 Problem Definition and Question of Analysis
4.2 Data Set Methodology
4.3 Performance Measurement Methodology
4.4 Results
4.4.1 Empirical Results of Equity Fund Managers´ Capabilities
4.4.2 Further Empirical Results Provided by Academic Researchers
4.5 Reasons for the Outperformance of Growth Equity Funds
4.6 Recommendations for Investors Based on the Empirical Findings
5 Summary and Conclusion
Reference List
Appendix
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