ISSN: 2225-8329
Open access
This article examines and contrasts the performance of small-cap growth and small-cap value funds in the United States. Between May 2016 and May 2022, a total of 139 small-cap growth funds and 97 small-cap value funds were collected via Yahoo Finance. The weekly data was then used to calculate the Treynor ratio, Sharpe ratio, and Jensen alpha. The finding shows that US small-cap value funds appear to be superior to small-cap growth funds. The Sharpe and Treynor ratios demonstrate the higher risk-adjusted performance of small-cap value funds relative to their benchmarks. whereas the Sharpe ratio is the only indicator of outperformance for small-cap growth funds. Regarding the Jensen alpha, value funds possessed positive alphas and outperformed the benchmark. Therefore, the results of this study could aid investors in picking a portfolio with superior risk-adjusted performance.
Arnott, R. D., Harvey, C. R., Kalesnik, V., & Linnainmaa, J. T. (2021). Reports of Value’s Death May Be Greatly Exaggerated. Financial Analysts Journal, 77(1), 44–67.
https://doi.org/10.1080/0015198X.2020.1842704
Bauman, W. S., Conover, C. M., & Miller, R. E. (1998). Growth versus value and large-cap versus small-cap stocks in international markets. Financial Analysts Journal, 54(2). https://doi.org/10.2469/faj.v54.n2.2168
Cao, C., Iliev, P., & Velthuis, R. (2017). Style drift: Evidence from small-cap mutual funds. Journal of Banking & Finance, 78, 42–57.
https://doi.org/10.1016/j.jbankfin.2017.01.009
Chen, J., Hong, H., Huang, M., & Kubik, J. D. (2004). Does fund size erode mutual fund performance? The role of liquidity and organization. American Economic Review, 94(5). https://doi.org/10.1257/0002828043052277
Dowd, K. (2000). Adjusting for risk: An improved sharpe ratio. International Review of Economics and Finance, 9(3). https://doi.org/10.1016/S1059-0560(00)00063-0
Eun, C. S., Huang, W., & Lai, S. (2008a). International Diversification with Large- and Small-Cap Stocks. Source: The Journal of Financial and Quantitative Analysis, 43(2), 489–523.
Eun, C. S., Huang, W., & Lai, S. (2008b). International diversification with large- and small-cap stocks. Journal of Financial and Quantitative Analysis, 43(2).
https://doi.org/10.1017/s0022109000003604
Fama, E. F., & French, K. R. (1998). Value versus growth: The international evidence. Journal of Finance, 53(6). https://doi.org/10.1111/0022-1082.00080
Hubner, G. (2005). The Generalized Treynor Ratio: A Note. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.375061
Indro, D. C., Jiang, C. X., Patuwo, B. E., & Zhang, G. P. (1999). Predicting mutual fund performance using artificial neural networks. Omega, 27(3).
https://doi.org/10.1016/S0305-0483(98)00048-6
Ippolito, R. A. (1989). Efficiency with costly information: A study of mutual fund performance, 1965–1984. Quarterly Journal of Economics, 104(1). https://doi.org/10.2307/2937832
Jain, R. (2007). Institutional and individual investor preferences for dividends and share repurchases. Journal of Economics and Business, 59(5).
https://doi.org/10.1016/j.jeconbus.2007.04.004
Jensen, M. C. (1968). The Performance of Mutual Funds in the Period 1945-1964. The Journal of Finance, 23(2), 389. https://doi.org/10.2307/2325404
Kok, U. W., Ribando, J., & Sloan, R. (2017). Facts about formulaic value investing. Financial Analysts Journal, 73(2). https://doi.org/10.2469/faj.v73.n2.2
Livingston, M., Yao, P., & Zhou, L. (2019). The volatility of mutual fund performance. Journal of Economics and Business, 104. https://doi.org/10.1016/j.jeconbus.2019.02.001
Pettengill, G., & Chang, G. (2014). Choosing between value and growth in mutual fund investing. Financial Services Review, 23(4).
Phuoc, L. T. (2018). Jensen’s alpha estimation models in capital asset pricing model. Journal of Asian Finance, Economics and Business, 5(3).
https://doi.org/10.13106/jafeb.2018.vol5.no3.19
Poon, S. H., Rockinger, M., & Tawn, J. (2004). Extreme value dependence in financial markets: Diagnostics, models, and financial implications. Review of Financial Studies, 17(2). https://doi.org/10.1093/rfs/hhg058
Reilly, F. K., & Brown, K. C. (2012). Investment Analysis and Portfolio Management (10th Edition). South-Western Cengage Learning.
Servaes, H., & Sigurdsson, K. (2022). The Costs and Benefits of Performance Fees in Mutual Funds. Journal of Financial Intermediation, 50, 100959.
https://doi.org/10.1016/j.jfi.2022.100959
Sharpe, W. F. (1966). Mutual Fund Performance. Source: The Journal of Business, 39(1), 119–138. https://www.jstor.org/stable/2351741
Shawky, H. A., & Tian, J. (2011). Small-cap equity mutual fund managers as liquidity providers. Journal of Empirical Finance, 18(5). https://doi.org/10.1016/j.jempfin.2011.09.002
Smart, S., Gitman, L., & Joehnk, M. (2013). Fundamentals of Investing (12th ed.). Pearson. www.myfinancelab.com.
Varamini, H., & Kalash, S. (2008). Testing Market Efficiency for Different Market Capitalization Funds. American Journal of Business, 23(2).
https://doi.org/10.1108/19355181200800006
Wallingford, B. A., & Reilly, F. K. (1979). Investment Analysis and Portfolio Management. The Journal of Finance, 34(5). https://doi.org/10.2307/2327255
Wattanatorn, W., & Padungsaksawasdi, C. (2020). Coskewness timing ability in the mutual fund industry. Research in International Business and Finance, 53.
https://doi.org/10.1016/j.ribaf.2020.101224
In-Text Citation: (Min et al., 2022)
To Cite this Article: Min, L., Shari, A., Yah, L. T. L., Rajendran, L., Ling, S., and Mei, T. Q. (2022). Growth and Value Fund Performance Comparison. International Journal of Academic Research in Accounting Finance and Management Sciences. 12(2), 660 – 671.
Copyright: © 2022 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode