Value versus growth: Australian evidence

Philip Gharghori, Sebastian Stryjkowski, Madhu Veeraraghavan

    Research output: Contribution to journalArticleResearchpeer-review

    15 Citations (Scopus)

    Abstract

    The value-growth effect is one of the most pervasive patterns in stock prices. In this study, the ability of four proxies for value-growth, book-to-market, sales-to-price, earnings-to-price and cash-flow-to-price to explain equity returns is analysed. The findings show that in aggregate, book-to-market best explains cross-sectional variation in Australian equity returns, which in isolation suggests that it is the superior proxy for value-growth. The analysis is taken further and the value-growth effect is examined separately in positive and negative earnings firms. After segregating firms, it is found that in the negative earnings sample, book-to-market is the best value-growth proxy and in the positive earnings sample, cash-flow-to-price has the highest level of significance and is thus the superior value-growth proxy. The economic significance of this result is telling, as the firms that report positive earnings are much larger than those that report negative earnings.
    Original languageEnglish
    Pages (from-to)393 - 417
    Number of pages25
    JournalAccounting and Finance
    Volume53
    Issue number2
    DOIs
    Publication statusPublished - 2013

    Cite this

    Gharghori, Philip ; Stryjkowski, Sebastian ; Veeraraghavan, Madhu. / Value versus growth: Australian evidence. In: Accounting and Finance. 2013 ; Vol. 53, No. 2. pp. 393 - 417.
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    Value versus growth: Australian evidence. / Gharghori, Philip; Stryjkowski, Sebastian; Veeraraghavan, Madhu.

    In: Accounting and Finance, Vol. 53, No. 2, 2013, p. 393 - 417.

    Research output: Contribution to journalArticleResearchpeer-review

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