Asian Journal of Research in Business Economics and Management
Year : 2013, Volume : 3, Issue : 10
First page : ( 289) Last page : ( 302)
Online ISSN : 2249-7307.

Pervasiveness of Value Premium: A study on Dhaka Stock Exchange

Dr. Rasul M. Serajur

Assistant Professor, Beanibazar Government College, Sylhet, Bangladesh

Online published on 4 October, 2013.

Abstract

This paper provides further evidence on the value premium of Dhaka Stock Exchange from 2000–2009 and a search process involving both price to earnings (P/E) and price to book value (P/B) ratios. The purpose of this paper is to answer the following question: does a value premium exist in Dhaka Stock Exchange and how pervasive is it? The study shows that the value premium is not driven by a few outliers, but it is pervasive as the overwhelming majority of stocks in the value portfolio have positive return. The return performance of small capitalisation stocks and large capitalisation stocks is similar in value and growth portfolio and value dominates growth regardless of size which also indicates the robustness of superior performance of value stocks over growth stocks. The study has analysed the value premium per sub-period to show the evolution of the value premium from 2000–2004 to 2005–2009. The value premium exists in both the sub-periods but they are not of equal size. In this study, attention has not been given to the states of the country mainly because of absence of any major changes in the economy in Bangladesh during the study period.

Top

Keywords

value stocks, growth stocks, value premium, firm size, price/earnings ratio, price/book value ratio.

Top