Vinsamlegast notið þetta auðkenni þegar þið vitnið til verksins eða tengið í það: http://hdl.handle.net/1946/5234
Value Investing and Portfolio Selection
In this thesis I try to answer two questions. The first question I address in the thesis is whether stock markets are efficient. I test if an investor can forecast future market returns by use valuation ratios to forecast returns. I find that there is evidence in support of forecast
ability of valuation ratios, where investors who invest in stock markets with high valuation ratios do better than investors who invest in markets with low valuation ratios in the long run.
I also conclude that portfolios consisting of value stocks outperform both portfolios
consisting of growth stocks and market indexes in the long run for both the US and
international markets. I conclude that there is evidence that markets are far from being
efficient over an extended period, contrary to what the efficient market hypothesis states. The second question which I address is whether the CAPM is able to explain the outperformance of value portfolios over growth portfolios and market indexes. I find that the CAPM is unable to explain the outperformance exhibit by the value portfolios, both for the US and international market in many cases. I find that a two factor model is able to do a better job than the CAPM in explaining the value premium.