Long Term Performance of Value and Growth Stocks on DSE: 3-Year Holding Period Returns

The study examines the performance of value and growth stocks on DSE, an emerging stock market in South Asia for the period of 2000 to 2009. The P/E and the P/B ratios are used to classify value and growth stocks for a 10-year period. Stocks with low ratios are value stocks and stocks with high ratios are growth stocks. The returns difference between value and growth stocks is value premium. The performance of value and growth portfolios have been examined in terms of 3- year buy-and- hold returns for the same value and same growth portfolio. The study found that value stocks portfolio outperforms growth stocks portfolio. However, the results indicate that a P/E ratio based search process appears to do a better job than does a search process based on P/B ratio in the Dhaka Stock Exchange during the study period.