Value versus growth: stochastic dominance criteria


In this paper, we study the relative performance of value versus growth strategies from the perspective of stochastic dominance. Using half a century US data on value and growth stocks, we find no evidence against the widely documented fact that value stocks stochastically dominate growth stocks in all three orders of stochastic dominance relations over the full sample period as well as during economic boom (good) periods. However, we observe no significant stochastic dominance relation between value and growth stocks during recession (bad) periods, which is inconsistent with the risk-based predictions but is better explained by behavioural models.Stochastic dominance, Value stocks, Growth stocks, Value premium,

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Research Papers in Economics

Last time updated on 06/07/2012

This paper was published in Research Papers in Economics.

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