A study of value investment strategies based on dividend yield, price-to-earnings and price-to-book ratios in Swedish stock market

Detta är en Magister-uppsats från Högskolan i Jönköping/Internationella Handelshögskolan; Högskolan i Jönköping/Internationella Handelshögskolan

Sammanfattning: As the existence of value premium has been showed in previous studies, this paper focuses on studying strategies for capitalizing this value premium in Swedish stock market. This paper studies the possible gains and risks of value investing strategies constructed with dividend yield, price-to-earnings (P/E) and price-to-book (P/B) ratios in Swedish stock market during 2006-2016.The findings show that the studied value portfolios offered abnormal returns during the studied time-period. Moreover, value stocks performed better than growth stocks when dividend yield and P/B-ratio were used as criteria. However, the paper could not confirm the same effect in P/E-ratio as high P/E tended to work better than low P/E. Out of the studied ratios, the best risk-adjusted returns were received from companies with the lowest P/B-ratios.The findings in this paper also indicate that including more ratio-based criteria in to an investment strategy does not offer more risk-adjusted returns.

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