Value and growth stocks on the Chinese stock market

Sammanfattning: This thesis investigates whether an investor can get superior returns when investing in value stocks compared to investing in growth stocks on the Chinese stock exchange (2009-2017). Value and growth stocks are classified by financial ratios. In this study stocks with low price to earnings ratio(P/E), price to cash flow ratio(P/CF), market to book value ratio(MV/BV) and price earnings growth ratio(PEG) will be defined as value stocks. Conversely, stock that score high on the aforementioned ratios are defined as growth stocks. The results of empiral analysis show that : a) value portfolios made up of low P/B ratio stocks yield significant positive return for both non risk-adjusted return and risk-adjusted return in the 3 investing horizons used in the study; b) value portfolios ranked by P/E and P/CF underperform in the comparison to growth portfolio in both 1 year horizon and 2 years horizon. In 3 years horizon the difference is however very small; c) Value portfolios consist of low PEG Ratio stocks tend to yield higher return compared to growth portfolios consist of high PEG Ratio stocks in the investing horizon of 1 year and 2 years while the return is similar in 3 year holding horizon.