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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title Growth vs. Value Investing: What is the Difference?
Organization Unit
Authors
  • Alexander David Thoma
Supervisors
  • Thorsten Hens
Language
  • English
Institution University of Zurich
Faculty Faculty of Economics, Business Administration and Information Technology
Number of Pages 93
Date February 2016
Abstract Text Value beats growth investing. At least this is the implication found in the financial literature of the past 25 years. The statement is flawed, however. Academia defines value and growth stocks as being on the opposite side of the price-to-book spectrum. When looking at the practice, this classification is wrong or too simplistic at best. This thesis shows that neither growth nor value investing can be bound by academic classification. A more realistic description would be that growth and value are simply two sides of the same coin. Growth investing defines what kind of stocks to buy (fast growing and high quality) and value defines how to buy them (at a bargain price). Value is only a buying principle that can be applied to every asset purchase. Furthermore, using US stocks from 1990 to 2015, this thesis shows a successful growth strategy that implements this value buying principle. The goal was to beat Peter Lynch’s growth fund at Fidelity, which averaged an annual 29% between 1977 and 1990. While the resulting returns are quite high, the strategy also has high volatility and is not able to match Lynch’s numbers.
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