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INVESTIGATING THE VALUE PREMIUM IN THE SWEDISH STOCK MARKET

Ljuca, Enes LU and van Dijkman, Björn LU (2018) NEKN02 20181
Department of Economics
Abstract (Swedish)
nvestigating the Swedish stock market, we find value stocks to have significantly outperformed growth stocks during the period of 1993 to 2017. As value stocks are found to be riskier during bad states of the economy, the existence of the value premium can be partly attributed to time-varying risk. Value betas are anticyclical, while growth betas exhibit a procyclical pattern. Controlling for time-varying risk slightly reduces the value premium and its significance, yet it remains positive. The search for other relevant factor using an APT model lead to the finding that a model based on the Carhart four-factor model reduces alphas to zero, with market excess returns and the momentum factor showing a negative effect on the value premium. An... (More)
nvestigating the Swedish stock market, we find value stocks to have significantly outperformed growth stocks during the period of 1993 to 2017. As value stocks are found to be riskier during bad states of the economy, the existence of the value premium can be partly attributed to time-varying risk. Value betas are anticyclical, while growth betas exhibit a procyclical pattern. Controlling for time-varying risk slightly reduces the value premium and its significance, yet it remains positive. The search for other relevant factor using an APT model lead to the finding that a model based on the Carhart four-factor model reduces alphas to zero, with market excess returns and the momentum factor showing a negative effect on the value premium. An APT model using macroeconomic variables shows limited explanatory power with regards to the value premium. (Less)
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author
Ljuca, Enes LU and van Dijkman, Björn LU
supervisor
organization
course
NEKN02 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Value premium, time-varying risk, APT, Sweden
language
English
id
8949052
date added to LUP
2018-07-02 15:40:12
date last changed
2018-07-02 15:40:12
@misc{8949052,
  abstract     = {nvestigating the Swedish stock market, we find value stocks to have significantly outperformed growth stocks during the period of 1993 to 2017. As value stocks are found to be riskier during bad states of the economy, the existence of the value premium can be partly attributed to time-varying risk. Value betas are anticyclical, while growth betas exhibit a procyclical pattern. Controlling for time-varying risk slightly reduces the value premium and its significance, yet it remains positive. The search for other relevant factor using an APT model lead to the finding that a model based on the Carhart four-factor model reduces alphas to zero, with market excess returns and the momentum factor showing a negative effect on the value premium. An APT model using macroeconomic variables shows limited explanatory power with regards to the value premium.},
  author       = {Ljuca, Enes and van Dijkman, Björn},
  keyword      = {Value premium,time-varying risk,APT,Sweden},
  language     = {eng},
  note         = {Student Paper},
  title        = {INVESTIGATING THE VALUE PREMIUM IN THE SWEDISH STOCK MARKET},
  year         = {2018},
}