GROWTH VS VALUE INVESTING:

THE NEPSE EVIDENCE

Study of Companies Listed on Nepal Stock Exchange 2067-2077 Period

A Project Work Report

Submitted by
Nijan Jyakhwo
T.U. Regd. No.: 7-2-1202-21-2017
Exam Roll No.:712020022
Group: Finance
Nepal Rastriya Prativa Khullashaikshik Anushandhan Campus Group: Finance

Submitted To:
The Faculty of Management
Research Department
Tribhuvan University
Kathmandu, Nepal

In partial fulfillment of the requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (B.B.S)

Kathmandu, Nepal
January, 2022
 DECLARATION

I hereby declare that the project work entitled “GRWOTH VS VALUE

INVESTING:THE NEPSE EVIDENVCE” submitted to the Faculty of Management,
Tribhuvan University, Kathmandu is an original piece of work under the supervision of
Mr. Rajesh Kumar Chaulagain, faculty member, Nepal Rastriya Prativa Khullashaikshik
Anushandhan Campus, Sanepa-2, Lalitpur, Kathmandu, and is submitted in partial
fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS).This
project work report has not been submitted to any other university or institution for the
award of any degree or diploma.

……………….
Nijan Jyakhwo

Nepal Rastriya Prativa Khullashaikshik

Anusandhan Campus
Sanepa-2, Lalitpur

ii
 Date: ………………….

SUPERVISOR’S RECOMMENDATION

The project work report entitled “GRWOTH VS VALUE INVESTING: THE NEPSE
EVIDENVCE” submitted by Nijan Jyakhwo of Nepal Rastriya Prativa Khullashaikshik
Anushandhan Campus, Sanepa-2, Lalitpur, Kathmandu, is prepared under my
supervision as per the procedure and format requirements laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirements for the
degree of Bachelor of Business Studies (BBS). I, therefore, recommend the project
work report for evaluation.

……………………..
Mr. Rajesh Kumar Chaulagain

Nepal Rastriya Prativa Khullashaikshik Anushandhan

Campus, Sanepa-02, Lalitpur

iii
 Date:………………….

ENDORSEMENT

We hereby endorse the project work report entitled “GRWOTH VS VALUE INVESTING: THE
NEPSE EVIDENVCE” submitted by Nijan Jyakhwo of Nepal Rastriya Prativa Khullashaikshik
Anushandhan Campus, Sanepa-2, Lalitpur, in partial fulfillment of the requirements for the
degree of the Bachelor of Business Studies (BBS) for external evaluation.

…………………. ………….
Mrs. Srijana Thapa Mr. Saroj Poudel
Chairman, Research Committee Campus Chief/ Principal

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 ACKNOWLEDGEMENTS

This thesis is a final assignment for Bachelor Program, Management Department, Finance
Management Major, Faculty of Economics and Business, Tribhuvan University. This thesis will
probably be the final chapter of my journey of Bachelor’s. My educational dream to obtain a
Bachelor’s degree started years ago when I started studying Chartered Accountant (CA) starting
in 2017. Most persons are most likely aware that writing a is a challenging and time consuming
yet interesting and rewarding. I have learned a lot about myself while writing this thesis. It is a
mission that frequently involves the help and support of a number of people in the writer’s life.
During the process to create this thesis, I have received many helps and endless support from
many people in which I am really grateful of. Therefore, I would like to acknowledge and thank
a number of people that have been instrumental in helping me to finalize my research report.

I deeply thank my mother and younger brother- Bishwo Laxmi Jyakhwo and Sagun Jyakhwo for
all the trust, timely encouragement, endless and support they have given me to pursuit my
dreams. I cannot forget a friend who went through hard times together, cheered me on, and
celebrated each accomplishment: Saroj Kasti. He is the person that inspires me and is my inner
strength to work hard, excel, and to accomplish my goals. Without him I would not have been
able to complete this research project. I would also like to express my gratitude and
acknowledgment to Srijana Thapa – member of research committee for providing me the
fundaments of knowledge and wisdom in Business Administration in order to succeed at a
scientific level of education.

There are no proper words to convey my deep gratitude and respect for my research advisor,
Supervisor. Rajesh Kumar Chaulagain for his continuous support, motivation and patience over
the time. He has inspired me to become an independent researcher and helped me realize the
power of critical reasoning. He also demonstrated what a brilliant and hard-working researcher
can accomplish. Also, I am truly grateful for Tribhuvan University. Tribhuvan University has
provided me a stable learning environment since the start of my studies.

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I also want to thank all lecturers and library staff of Nepal Rastriya Prativa Khullashaikshik
Anushandhan Campus, Sanepa-2, Lalitpur, for all the given reading materials, knowledges,
supports during my time study here.

………………………..
Nijan Jyakhwo
Nepal Rastriya Prativa Khullashaikshik Anushandhan Campus,
Sanepa-2, Lalitpur

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 TABLE OF CONTENT

Title Page…………………………………………………………………………………………..i
Declaration......................................................................................................................................ii
Supervisor’s Recommendation.......................................................................................................iii
Endorsement...................................................................................................................................iv
Acknowledgements..........................................................................................................................v
Table of Contents..........................................................................................................................vii
List of Tables……………………………………………………………………………………..ix
List of Figures……………………………………………………………………………………..x
ABBREVIATIONS........................................................................................................................xi
CHAPTER-I....................................................................................................................................1
INTRODUCTION...........................................................................................................................1
1.1 Background....................................................................................................................
1.2 Profile of Nepal Stock Exchange...................................................................................
1.3 Problem Formulation.....................................................................................................
1.4 Objectives of the Study..................................................................................................
1.5 Rationale of the Study...................................................................................................
1.6 Review...........................................................................................................................
1.6.1 Conceptual Review.........................................................................................5
1.6.2 Review of previous works............................................................................21
1.7 Research Methodology................................................................................................
1.7.1 Research Design...........................................................................................24
1.7.2 Research Variables.......................................................................................25
1.7.3 Separation of value and growth stocks.........................................................26
1.7.4 Portfolio construction of value & growth stocks..........................................26
1.7.5 Portfolio returns of value & growth stocks...................................................28
1.7.6 Portfolio return per unit of risk.....................................................................28
1.7.7 Risk-free Rate...............................................................................................29
1.7.8 Comparing return with benchmark...............................................................31
1.10 Limitation of the study...................................................................................31

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CHAPTER-II: RESULTS AND ANALYSIS...............................................................................33
2.1 Data presentation.........................................................................................................
2.1.1 Sample..........................................................................................................33
2.1.2 Data...............................................................................................................37
2.2 Analysis of Results......................................................................................................
2.2.1 Descriptive Statistics....................................................................................38
2.2.1 Portfolio performance analysis.....................................................................41
2.3 Findings.......................................................................................................................
2.3.1 Efficient Market Hypothesis and Results from portfolios based on PE and
PB measure............................................................................................................53
2.3.2 Behavioral Finance and Results from portfolios based on PE and PB
measure..................................................................................................................54
2.3.3 Results from Bullish and Bearish Period......................................................55
2.3.4 Previous research..........................................................................................56
CHAPTER III-SUMMARY AND CONCLUSION......................................................................58
3.1 Research summary.......................................................................................................
3.2 Conclusion...................................................................................................................
3.2.1 Answer to the research problem...................................................................58
3.2.2 Contributions and research gap....................................................................61
3.2.3 Suggestions for future research....................................................................62

BIBLIOGRAPHY
APPENDICES

viii
 LIST OF TABLES

Table No. Title Page No.

TABLE 1. RISK FREE RATE........................................................................................................30

TABLE 2. BULLISH AND BEARISH PERIOD............................................................................33
TABLE 3. NUMBER OF SAMPLES TAKEN IN EACH YEAR.....................................................34
TABLE 4. LIST OF SAMPLES USED IN THE RESEARCH........................................................35
TABLE 5. DESCRIPTIVE OF GROWTH AND VALUE PORTFOLIO........................................40
TABLE 6. PURE RETURN OF VALUE AND GROWTH PORTFOLIOS BASED ON PE..........43
TABLE 7. PURE RETURN OF VALUE AND GROWTH PORTFOLIOS BASED ON PB..........45
TABLE 8. RISK ADJUSTED YEARLY RETURNS OF PORTFOLIOS BASED ON PE RATIO. .47
TABLE 9. RISK ADJUSTED YEARLY RETURNS OF PORTFOLIOS BASED ON PB RATIO. .49
TABLE 10. BULLISH AND BEARISH PERIODS........................................................................50
TABLE 11. RISK-ADJUSTED RETURN OF PE AND PB BASED PORTFOLIOS IN BULLISH
PERIOD.........................................................................................................................................51
TABLE 12. RISK-ADJUSTED RETURN OF PE AND PB BASED PORTFOLIOS IN BEARISH
PERIOD.........................................................................................................................................52
TABLE 13. AVERAGE YEARLY RISK-ADJUSTED RETURN OF PE AND PB BASED
PORTFOLIOS FROM 2068/69-2077/78…………………………………………………………. ……52

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 LIST OF FIGURES

Figure No. Title Page No.

FIGURE 1. METHOD OF PORTFOLIO CREATION................................................................28

FIGURE 2. NEPSE PERFORMANCE 2068/69-2077/78.............................................................34
FIGURE 3. RETURN OF VALUE AND GROWTH PORTFOLIOS BASED ON PE..............43
FIGURE 4. RETURN OF VALUE AND GROWTH PORTFOLIOS BASED ON PB...............46
FIGURE 5. RISK ADJUSTED RETURN OF PORTFOLIOS BASED ON PE RATIO.............48
FIGURE 6. RISK-ADJUSTED RETURNS OF GROWTH AND VALUE PORTFOLIO BASED
ON PB RATIO..............................................................................................................................49

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 ABBREVIATIONS
AR : Annualized Return
EMH. : Efficient Market Hypothesis
EPS : Earnings Per Share
F.Y. : Fiscal Year
i.e. : That is
MPT : Modern Portfolio Theory
No. : Number
PB : Price-to-Book
PE : Price-to-Earning
T.U. : Tribhuvan University
ρ : Standard Deviation

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 CHAPTER-I

INTRODUCTION

1.1 Background
For a long time, the efficient market theory implied that prices reflected all available information
at any point in time. It was widely accepted and taught at most business schools. Over the last
few decades, however, a number of well recognized scientists have proven the contrary: prices
do not reflect all information available in the market. It indicates that investors can achieve
abnormal returns by following certain investment strategies. It is a much-discussed economic
question whether value or growth stocks promise superior returns. The subject of value and
growth stocks has been a widespread theme of examination during the 1990’s and 2000’s.
Various scholars, studied the subject of value and growth stocks in relation with return, risk, and
overall performance. For several decades scholars have pointed out the presence of an excess
return offered by value stocks with respect to growth stocks (see for instance Lakonishok et al.,
1994; Fama and French, 1992 and 1998). It is widely accepted nowadays that value stocks
generate higher returns than growth stocks. The fundamental idea behind the value approach is to
sell overvalued stocks and purchase undervalued stocks. Given the evidence that value stocks
outperform growth stocks in the US market, this paper examines if this is also true for the Nepal
stock market.

1.2 Profile of Nepal Stock Exchange

A stock market index is a statistical measure which shows changes taking place in the stock
market. To create an index, a few similar kinds of stocks are chosen from amongst the securities
already listed on the exchange and grouped together. Stock market indices are used to study the
trend of growth pattern in the economy, to analyze as well as to forecast business cycles and to
correlate it with economic activities (Bhalla 1997). The criteria of stock selection could be the
type of industry, market capitalization or the size of the company. The value of the stock market
index is computed using values of the underlying stocks. Any change taking place in the
underlying stock prices impact the overall value of the index. If the prices of most of the

1
underlying securities rise, then the index will rise and vice-versa. In this way, a stock index
reflects overall market sentiment and direction of price movements of products in the financial,
commodities or any other markets.

The NEPSE index is the primary equity market index of NEPSE. It is calculated to measure the
capitalization of the stock market. The Nepal Stock Exchange (NEPSE) is the only Stock
Exchange of Nepal. It is located in Singha Durbar Plaza, Kathmandu, Nepal. The calculation of
NEPSE index is based on the concept of market capitalization (sum of the market capitalization
of all the company listed in Nepal Stock Exchange). If the ratio of current period market
capitalization is multiplied by the multiplier 100, we get the NEPSE index. This method of index
calculation is called value-weighted method. The Nepal Stock Exchange calculates this type of
indicator on each trading day that indicates the capitalization of all the companies listed on the
NEPSE has either decreased or increased. A drop in the index means investors are frustrated or
unwilling to invest and the country’s economic situation is deteriorating.

As of 8 February 2021, the market capitalization of the companies listed on NEPSE was

approximately US$30 billion. It is regulated by the Securities Board of Nepal. The basic
objective of NEPSE is to impart free marketability and liquidity to the government and corporate
securities by facilitating transactions in its Trading Floor through member, market
intermediaries, such as broker, Market Makers etc. NEPSE opened its trading floor on 13
January 1994. As of 16 March 2021, the number of listed companies is 285, which includes
Commercial Banks, Hydro Power Companies, Insurance Companies and Finance Companies
among others. The Exchange has 97 registered brokers as of April 2021.

1.3 Problem Formulation

The main goal of Investing is to put money to work and potentially build wealth in moat
effective way. Following good investing Strategy may allow money to outpace inflation and
increase in value. An investment strategy is a way of thinking that shapes how you select the
investments in your portfolio. The best strategies should help to meet financial goals and grow
wealth while maintaining a level of risk that lets you sleep at night. The strategy may influence
everything from owning the types of assets to approach of buying and selling those assets.

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Evidence seems to indicate that there is some truth to the claim that value stocks do outperform
growth stocks. Basu (1975, 1977, 1983) got results that all spoke for abnormal returns for low
P/E stocks compared to high P/E stocks on the U.S Market. Fama and French (1992), proponents
of the market efficiency theory, argued that the reason value stocks outperformed growth stocks
was because of higher risk of value stocks. Lakonishok et. al (1994) tested this on U.S stocks and
found that value stocks on the contrary were less risky compared to growth stocks, and still
outperformed them. Newer studies also seem to confirm this behavior, examples of this being
Fama, French (2012) where risk adjusted value premiums were found in all the regions tested
(North America, Europe, Asia Pacific and Japan). Value premium was also found in Thailand,
(Sareewiwatthana, 2011) in India (Deb, 2012) in New Zeeland (Truong, 2009) and finally
Australia (Gharghori, et al 2013).

Hence the phenomenon of value-growth stock is quite interesting to be explored further in Nepal.
Since the previous studies found a value premium in India. With this information in mind, a
study into Value vs Growth investing on the Nepal stock exchange will bring new and interesting
knowledge to the field. The motive of this study to investigate following research problem:

1. Value vs. Growth stocks: which offered the highest return during the period 2068/69-
2077/78?
2. Which portfolio offered the highest risk-adjusted return during the period 2068/69-
2077/78?
3. Which of the portfolio was more successful to beat the NEPSE’s return?

There are numerous researches that is done to find the effective portfolio performance between
value and growth stocks in various countries in various years. Yet, majority of researchers do not
perform research on performance of value and growth stock in bullish and bearish market. So, to
find the effective portfolio in bullish and bearish market, the following research question is
developed:
4. Which style of investing offered the highest risk adjusted return in bullish and bearish
period occurred between the period 2068/69 and 2077/78?

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1.4 Objectives of the Study
The purpose of this study is to ascertain Profitable Investing System that provide consistent and
higher return in Nepalese market. The aim is to compare, returns of the Growth Portfolio based
actually have higher returns in the future than Value Portfolio. This is done by categorizing
stocks into value and growth stocks by using fundamental analysis, forming portfolios with
either growth or value stocks and then comparing the return over time between the portfolios.
This means that the method in this study is derived from the method used by Lakonishok et al.
(1994) and the aim is to build on this study and other previous studies of the Nepalese market.

After analysis of these previous studies, it can be concluded that such type of research should
also be conducted in Nepalese stock Market. Majority of researches on investing styles are only
covered in market of developed countries. Therefore, the aim is to take the basic method from
these studies and improve them by using a good risk-adjustment, flexible investment horizons,
clear separation between value and growth stocks and by using a sufficiently long time period.
Doing this, the author of this paper hopes to be able to make a more comprehensive and
complete study of Nepalese stock exchange and other Stock Exchanges of Developing countries.
Hopefully, previous findings made by other papers can be confirmed in this study. There are
three other objectives that will be studied. They are:
1. To analyze risk adjusted and non-risk adjusted return in overall cyclical view of market
as well as in bearish and bullish market cycle.
2. To compare the performance of growth and value portfolio with NEPSE’s performance in
terms of both risk-adjusted and non-risk adjusted return.
3. To compare the volatility and the of value and growth portfolio.

1.5 Rationale of the Study

This study is all about answering the question, which is better? Growth Investing or Value
Investing in Nepalese Market. This is evaluated in the context of an individual investor's time
horizon and the amount of volatility, and thus risk, that can be endured. This study can be a great
use of investors, fund managers, investment advisors and analysts in making investment

4
decisions, selection of appropriate strategies as well as their risk tolerance, investment goals, and
time horizon. It is important to note that the result of this study is based on yearly performance of
portfolio. So, the performance of either growth or value will also depend in large part upon the
point in the cycle that the market happens to be in.

This study will help deepen knowledge about stocks listed in Nepal Stock Exchange and
particularly inform further research in the area of growth versus value investing. This study will
also provide support for next research that is related to this topic.

1.6 Review
The literature review is a written overview of major writings and other sources on a selected
topic. Sources covered in the review may include scholarly journal articles, books, government
reports, Web sites, etc. The literature review provides a description, summary and evaluation of
each source. It is usually presented as a distinct section of a graduate thesis or dissertation. For
this, NRB's directives, books, journals, articles, annual reports and some related research papers
have been reviewed. This chapter has been, broadly classified into two sectors: conceptual
review and review of previous works.

1.6.1 Conceptual Review

One of the top goals of many investors and money managers is to beat the market. This is
typically defined as achieving better returns than the NEPSE. According to Terrance Odean, a
finance professor at the University of California, Berkley's Has School of Business, "Many of the
mistake’s investors make come from a lack of any understanding of the innate disadvantages
they face." "The reality is there will always be a lure to try and beat the market, especially since
those who have beat it consistently are revered so highly (Bill Miller, Peter Lynch) and/or are
compensated well (hedge fund managers). I think the market can be beaten, but even a broken
clock is right twice a day. Best way to describe it: It's possible but not probable," says Robert
Laura, author of "Naked Retirement: A Stimulating Guide to A More Meaningful Retirement"
and president of SYNERGOS Financial Group.

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According to Laura, the average individual investor has little chance of beating the market. He
says the common investor uses mutual funds, is stuck in plans which essentially track the broader
index, and pays higher fees as compared to stock, index funds, or ETFs. Also, many mutual
fund-type investments don't use stop loss order to protect gains and thus do not always provide
the type of protection individualized portfolios can perform. As he puts it, "investors are set-up
to fail from the get-go."

It’s wrong to assume that a any investing strategy, no matter how promising it is, will beat the
market and provide uniform returns year after year. Even a great investing strategy will
underperform the market in a significant number of years and all strategies will have money-
losing years. That’s just part of the course.

Most days, the stock market doesn’t see big moves higher or lower. Generally, indexes like the
NEPSE gain or lose less than 1% a day. But from time to time, the market experiences
significant price changes, which professional investors refer to as “volatility.” Market volatility
is the frequency and magnitude of price movements, up or down. The bigger and more frequent
the price swings, the more volatile the market is said to be. Today’s markets is all about
examining the price action of the financial markets instead of the fundamental factors that (seem
to) effect market prices are so responsive to pricing actions. Price volatility is very high and
unpredictable and also
market rotation is reciprocal that is, more risky stocks produce lower returns and therefore the
market does not act properly.

Investors believe there is a cause and effect between fundamental factors and price changes. This
means, if the fundamental news is positive the price should rise, and if the news is negative the
price should fall. However, long-term analyses of price changes in financial markets around the
world show that such a correlation is present only in the short-term horizon and only to a limited
extent. It is non-existent on a medium- and long-term basis. In fact, the contrary is true. The
stock market itself is the best predictor of the future fundamental trend. Most often, prices start
rising in a new bull trend while the economy is still in recession while there is no cause for such
an uptrend. Vice versa, prices start falling in a new bear trend while the economy is still growing,

6
and not providing fundamental reasons to sell. There is a time-lag of several months by which
the fundamental trend follows the stock market trend. Moreover, this is not only true for the
stock market and the economy, but also for the price trends of individual equities and company
earnings. Stock prices peak ahead of peak earnings while bottoming ahead of peak losses.

Investor follow Fundamental analysis to assess the intrinsic value of a stock. Such analysis helps
you identify key attributes of the company and analyze its actual worth, taking into account
macro and microeconomic factors. Fundamental analysis attempts to identify stocks offering
strong growth potential at a good price by examining the underlying company’s business, as well
as conditions within its industry or in the broader economy. Fundamental analysis uses three sets
of data:

1. Historical data to check how things were in the past

2. Publicly known information about the company, including announcements made by the
Management and what others say about the company 
3. Information that is not known publicly but is useful, i.e., how the leadership handles
crises, situations, etc.

Many investors use strictly fundamental factors in their analysis of a company and its share
price. Others have found that they can create a more robust model of valuation and price
expectation
using both fundamental and technical factors, such as relative price strength or market sentiment.
The goal is to determine whether the current price of the stock reflects a value that is different
from what the fundamental factors and overall market sentiment might suggest. If such a
difference is found, then there's a chance that an investment opportunity exists.

Much literature and research have been produced in the field of stock investment in order to
produce a strategy that outperforms the market and will provide an investor with superior
returns. The purpose is to provide an investor with a model or framework in order to find
underpriced and overpriced stocks. Once the appropriate stocks have been located, the investor
can then buy the underpriced ones and short the overpriced ones in order to make a profit.

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For several decades scholars have pointed out the presence of an excess return offered by value
stocks with respect to growth stocks (see for instance Lakonishok et al., 1994; Fama and French,
1992 and 1998). Graham & Dodd (1934) were one of the first scholars to make a distinction
between value and growth investing (glamour stocks) while the actual recognition of ‘growth’
investing can be assigned to Price Jr. (Babson, 1951). Value and growth investing are widely
recognized specializations adopted by money managers. These specializations draw on, and
stimulate, a large body of academic empirical research. Value investing present an opportunity to
buy shares below their actual value, and growth stocks exhibit above-average revenue and
earnings growth potential. Growth investing representing stocks tend to have relatively high
valuations as measured by price-to-earnings or price-to-book value ratios. However, they also
see faster growth in revenue and income than their peers.

A great deal of academic empirical research has been published on value and growth investing.
The evidence suggests that, even after taking into account the experience of the late 1990s, value
investing generates superior returns. Common measures of risk do not support the argument that
the return differential is a result of the higher riskiness of value stocks. Instead, behavioral
considerations and the agency costs of delegated investment management lie at the root of the
value–growth spread.

Building on earlier studies of stock market “anomalies,” the research on value versus growth
generally agrees that value investment strategies, on average, outperform growth investment
strategies. The reward to value investing is more pronounced for small-capitalization stocks and
is present in equity markets outside the United States as well. The reasons for the superior
performance of value investing, however, are controversial. Some researchers attribute the higher
returns to the higher risk of value stocks; other researchers contend that the rewards to value
investing stem from cognitive biases underlying investor behavior and the agency costs of
delegated investment management.

1.6.1.1 Efficient Market Hypothesis

Equity investors likes to invest in companies that they believe will achieve high earnings growth
in the future. This is because high growth companies come with a higher future dividend paying

8
potential. This, in turn, invites more investors to buy them. It ultimately leads to an appreciation
of the stock price. This philosophy is based on three assumptions: other investors in the market
have all the relevant information to form an opinion about the future prospects of the company;
they act upon this information, and this information gets reflected in market prices.

A market that displays these characteristics is called an efficient market. In such markets, all
investors are privy to all the information pertaining to a company. They all use the same set of
information to make their investment decisions. As a result, nobody can make more profit than
the other and all the relevant information is reflecting in market prices. This was the central idea
of Eugene Fame’s efficient market hypothesis of the 1960’s.

Fundamental analysts use three categories of data—historical data, publicly known information
about the market (such as announcements made by the management in the media and the annual
reports released by it) and private information (or the information known only to a select few,
owing to their position with the organization.

According to Fama, in an efficient market, there is no private information. All the information is
available for free and known to all. As a result, all investors act on this common set of
information and make equal profits. No one is able to ’beat the market’ or earn ‘abnormal
profits’ based on special information or analysis. Also, there is no time lag between the release of
the information and its influence on prices.

Fama’s theory has earned widespread disrepute because what it proposed appears to be a fantasy.
No two investors achieve the same returns in a market. Every year, a horde of investors earn
greater returns than benchmark indices, such as the NASDAQ and BSE Sensex. Further, not all
information is available to everybody. There are people, such as top employees of the company
that are privy to classified information, not known to all. They sometimes use it unethically to
make greater profits than other people. This practice is called insider trading. It is punishable by
law. Further, institutions like investment banks and stock brokerages, deduce vital information
from the analysis of companies. This is only available to their clients for a price. Thus,
information is not free either. It is clear that Fama’s treatise regarding markets being efficient is

9
therefore questionable. Even so, his theory is appreciated because it paints a picture of what
could happen if market conditions were perfect. Just that probably, current market conditions
aren’t perfect.

1.6.1.2 The Impact of Behavioral Finance on Stock Markets

Behavioral finance studies the psychology of financial decision-making. Most people know that
emotions affect investment decisions. People in the industry commonly talk about the role greed
and fear play in driving stock markets. Behavioral finance extends this analysis to the role of
biases in decision making, such as the use of simple rules of thumb for making complex
investment decisions. In other words, behavioral finance takes the insights of psychological
research and applies them to financial decision making. Most of the financial market anomalies
cannot be explained using traditional models. Behavioral finance easy explains why the
individual has taken a specific decision, but did not find as easily an explanation about how
future decisions will be. Classical finance has as a cornerstone the Efficient Markets Hypothesis,
according to whom, since everyone has access to the same information, It is not possible to
change the market position, because that stock prices are, in fact, efficient, reflecting everything
we know as investors. A market in which prices always “fully reflect” available information is
called efficient. Synthesizing, Efficient Markets Hypothesis assume that capital market are
information ally efficient. Eugene Fame, the father of efficient market hypothesis reveals,
“Market efficiency survives the challenge from the literature on long-term return anomalies.
Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent
overreaction to information is about as common as under reaction, and post event continuation of
pre-event abnormal returns is about as frequent as post-event reversal. Most important, consistent
with the market efficiency prediction that apparent anomalies can be due to methodology, most
on-term return anomalies tend to disappear with reasonable changes in technique In contrast,
behavioral finance assumes that, in some circumstances, financial markets are information ally
inefficient. The main purpose of this article is to have an insight into how the influence of
psychology on the behavior of the investors can explain capital markets imperfections. Human
nature is perfectible, but it is not perfect. Investors are people with many deviations from rational
behavior, which often make illogical decisions. In the existing global financial perspective, the
major influence of psychological factors in investment decision-making is undeniable.

10
De Bondt and Thaler (1985) published article: “Does the Stock Market Over-react?” in a Journal
of Finance. They propounded that the people are systematically over-reacting to unexpected and
dramatic news results in substantially weak form inefficiencies in the stock market. Mental
accounting is a set of cognitive operations used by individuals and households to organize
evaluate and keep track of financial activities. Thus, behavioral finance is the application of
scientific research on the psychological, social and emotional contributions to market
participants and market price trends. It also studies the psychological and sociological factors
that influence the financial decision making process of individual groups and entities.In this
paper, a large body of psychological literature finds that the people tend to be over-confident and
overly optimistic. This literature find that the biased managers over-invest their firms cash flows,
initiate too many mergers, start more firms and more naval projects and tend to stick with
unproductive investment policies longer. Corrective measures to reduce the effect of manager
biases include learning, inflated discount rate and contractual incentives but their effectiveness in
curbing over investment appears to be limited.

1.6.1.3 Classification of stocks

The financial analysis analyzes the previous performance of firms and categorize their stocks
into growth stocks and value stocks. Growth stocks are stocks that their price is higher than the
average in comparison with their current cash flows, earnings, dividends and book value.
Consequently, in the long run, these expensive stocks will have lower returns for their holders. In
contrast, value stocks have higher returns for their holders (Haugen, 2001). In an efficient
market, differences between the performance of growth and value stocks are based on that,
growth (expensive) stocks are riskier than value (cheap) stocks. Thus, portfolios with more
growth stocks expect to have higher returns in comparison with portfolios with more value
stocks. In other words, value stocks have lower price volatilities and therefore will have lower
returns (Fama & French, 1992). Growth and value stocks will have different returns based on
firm’s size, time horizon (short-term, mid-term and long-term) and market’s recession and
brightness. For example, when time horizon of return calculation becomes longer, stocks’ price
trend will be inverted. In addition, when several positive and negative events occur, market will
believe that this trend will continue in the long run. Thus, stocks’ price will inflate due to this

11
expectation. In other words, market will fall in to this trap that previous short success will
continue in the future. When this trap is identified in the market, inflation of stocks will decrease
and this leads to inverted stocks’ trends in the long run. Also, if a stock has a better performance
in one or two previous months, in comparison with its previous performances, it tends to have a
lower performance in the next month. This reflected trend probably relates to price pressures
(such as high volume of buying or selling firm’s stocks that leads to higher or lower prices) that
will be equalized in the future (Poterba & Summers, 1998). Small stocks will have higher returns
than average in the long run. Perhaps, the reason is that investors hypothesize these stocks more
risky and more expensive in comparison with expensive stocks. The information about these
stocks is so limited because Yahyazadehfar, M., Aghajani, H. & H. Shababi. The number of their
active trading in the market is very low. Thus, traders expect that their price should be high. In
other words, there is a great gap between buying and selling price of these stocks. Due to any
reason, since 1926, these stocks have had higher rate of returns. Today, it is evident that value
stocks are usually smaller than growth stocks. It means that, some of golden opportunities in the
market are resulted from small stocks (Lakonishok et al, 1994).

The differences among value stocks and growth stocks and the effective variables on them lead
investors to apply modern financial knowledge in order to buy or sell stocks. Basically, decision
making about selecting of these stocks and also making a good portfolio from them are the
important things that each investor should pay attention to it. In this research, growth and value
stocks of Nepal Stock Exchange have been used in order to investigate that which of them a
better performance in this market has based on three variables of size, risk premium and return.
In order to investigate the research goal, three hypotheses will be used.

1.6.1.4 Investment Strategies

Investment strategies are consistent and methodical approaches to investing. An investment
strategy, often also referred to as an investment style or investment philosophy, simply describes
the overarching approach taken by the fund manager when assembling a portfolio of assets, and
how they’re proposing to meet the fund's stated investment objectives.   They guide investing
decisions according to a set of criteria or according to a theme. Investing strategies can provide
discipline and method to your investing activities. They also give a way to measure or compare

12
your investment returns. Without a strategy it’s very difficult to set investment goals, let along
know if you are achieving them. Investment strategies all have strengths and weaknesses, which
allows to evaluate and compare them. This helps when deciding on the right investment strategy
in given financial situation, knowledge, and goals. Investment styles can be divided, and further
sub-divided, in a host of different, and often highly esoteric, ways. There are plenty of
approaches to investing in the stock market. The preference of pursuing a specific style depends
upon personal- or organizational characteristics as well as the economic behavior. Some
strategies may appeal to a person more than others, and each has its own strengths and
weaknesses. Concentrating on one or two strategies allows to develop the skill and experience to
maximize returns. In this research study some of the most popular investment strategies; growth
and value investing are outlined.

a. Value Investing
The origins of value investing go back to research by Benjamin Graham and David Dodd in the
1920s, when both men began teaching at Columbia Business School. Many of the concepts of
value investing are described in their book, “Security Analysis,” and in Graham’s book, “The
Intelligent Investor.” Warren Buffett, the most successful practitioner of value investing, was a
student of Graham’s at Columbia.Since the publication of “The Intelligent Investor” by
Benjamin Graham, what is commonly known as “value investing” has become one of the most
widely-respected and widely-followed methods of stock picking. Famed investor Warren Buffet,
while actually employing a mix of growth investing and value investing principles, has publicly
credited much of his unparalleled success in the investment world to following Graham’s basic
advice in evaluating and selecting stocks for his portfolio.

Value investing is a time-tested and proven investment methodology which focuses on

determining the intrinsic value of a company based on its current and historical financial
statements. Value investing is nothing more or less than buying investments on sale. An
investment is worthwhile only if there is a strong set of competitive advantages within the
business and if a significant margin of safety exists between the company’s intrinsic value and its
current market price. Value investing starts from the premise that an investor who buys stock in a

13
company owns part of the business. While this may seem obvious, many investors “play the
market” without regard to the underlying fundamentals of the companies they own.

As a business owner, the investor should evaluate the financial statements of companies to assess
their intrinsic values. This type of evaluation is known as fundamental analysis. Intrinsic value is
rarely a single number. Rather, due to the many assumptions that go into valuing a complex
enterprise, intrinsic value is often a range. This lack of precision shouldn’t concern an investor.
In the words of Mr. Buffett, “It is better to be approximately right than precisely wrong.” Value
investors will consider investing in a company whose price is at or below its intrinsic value.

In order to evaluate if a stock actually can be considered to be a value investing different ratios
are used as measurement of this. If a company has low ratios of price to earnings (P/E), price to
book (P/B) and/or price to cash flow (P/C) they can be assumed to have value stocks (Fama &
French, 1998, p.1975).

b. Growth Investing
The wholesome reason why investors bid their money in stocks is to get more in returns. This is
only possible when the right strategy is used while bidding the money. But wait, there isn’t a
hero strategy that works for all, and there are dozens and dozens of investing strategies made by
stock market experts. One such strategy is “Growth Investing”, which is one of the favourites for
investors who want to make a good profit. There are several ways one can invest, especially in
the stock market. A certain percentage of stock marketers buys stocks and hold them for a long
period while a few sells them in a shorter span. There are also day traders who buy and sell the
stocks on the very same day. Apart from such investors, there are Growth investors.
The focus of Growth investors is to invest in small and young companies that are believed to
outperform the industry in the coming years. It is a high-risk investment but involves huge
profits in returns which lures the investors.

One of the worrisome subjects of Growth investing is proper research and performance. If the
company fails, you are losing your money and blindly investing in any small company will only
help you in luck. Good research is to be conducted considering the vision of young companies;

14
this is because you will be holding on to the investment for a longer period and wait until your
profits are mature. The profits are in the form of capital appreciation, which is the goal of
Growth investors. Apart from this, Growth-stock companies also invest their profits back in the
business to avoid paying a dividend to their shareholders.

According to Bauman & Miller (1997, p.57) an investment in growth stock is especially popular
and attractive during times of strong economic growth. Further, they explain that a stock can be
characterized as a growth stock if the stock has high earnings to price (P/E), price to book (P/B)
and/or price to cash flow (P/C).

1.6.1.5 Valuation of stocks

Valuation is the financial process of determining what a company is worth. he importance of
valuing stocks evolves from the fact that the intrinsic value of a stock is not attached to its
current price. By knowing a stock’s intrinsic value, an investor may determine whether the stock
is over- or under-valued at its current market price. Valuing stocks is an extremely complicated
process that can be generally viewed as a combination of both art and science. Investors may be
overwhelmed by the amount of available information that can be potentially used in valuing
stocks (company’s financials, newspapers, economic reports, stock reports, etc.).Therefore, an
investor needs to be able to filter the relevant information from the unnecessary noise.
Additionally, an investor should know about major stock valuation methods and the scenarios in
which such methods are applicable.

On the basis of the value derived in the methods used, there are two types of share valuations
They are: –
1. Absolute Valuation
Absolute valuation is the type used to calculate the “intrinsic” value of the shares, which has
been discussed above. This method only focuses on the fundamentals of the company –
dividends, cash flow, and the growth rate of the concerned business.

2. Relative Valuation

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The method under relative valuation uses ratio analysis, among others, to ascertain the value of a
stock in comparison to its peers. The methods under this type are numerous and are easy to use
as well.

Valuation ratios put that insight into the context of a company’s share price, where they serve as
useful tools for evaluating investment potential. valuation metrics is used to determine whether a
stock is overvalued, undervalued, or fair. For example, some stocks may have been more
expensive than others based on certain metrics. Thus, they are no longer worthy of being
collected or held because the potential for prices to rise is minimal. On the contrary, the price
may correct downwards in the future. When investing in the stock market, there are several stock
alternatives to choose from. Valuation ratio metrics help us to select them and make investment
decisions.

Valuation ratios are popular among investors because they are easy to calculate. In fact, we no
longer have to calculate it manually. Most financial websites or apps have this available. Using
multiples in valuation analysis helps analysts make sound estimates when valuing companies.
This is especially true when multiples are used appropriately because they provide valuable
information about a company’s financial status. Furthermore, multiples are relevant because they
involve key statistics related to investment decisions. Finally, the simplicity of multiples makes
them easy to use for most analysts. However, this simplicity can also be considered a
disadvantage because of the fact that it simplifies complex information into just a single value.
This simplification can lead to misinterpretation and makes it challenging to break down the
effects of various factors.

To calculate a valuation ratio, a company’s market value is compared with basic financial
metrics such as cash flow, revenue, and net income (net profit). The most Commonly used ratios
to value stock as Growth stock or value stock are: Price-to-earnings ratio, Price-to-book ratio,
Price-to-sales ratio and Price-to-cash-flow ratio. Fama & French (1998, p.1975) used PE, PB and
PC in their research as these are most commonly used ratios by investors since they produced
stable returns over the year. Price-to-earnings ratio and Price-to-book ratio is used in this study to
meet the objectives of the research.

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a. Price-to-earnings
The P/E Ratio helps investors gauge the market value of a share compared to the company’s
earnings. In simple terms, you get to know how much the market is willing to pay for a stock
based on the company’s past and future earnings. For example, a high P/E Ratio tells you that a
stock price is high compared to company earnings and may be overvalued. Similarly, a low P/E
Ratio indicates that the share price is low compared to company earnings and is undervalued.
Therefore, a company with high PE ratio is considered as growth stock whereas company with
low PE ratio is considered as value stock. However, It is important to determine if the reason for
the share price being low is the company’s underperformance over some time.

Earnings are substantial when valuing a company’s stock as investors want to know how
profitable a company is and how valuable it will be in the future. Moreover, if the growth and
level of earnings of the company remain constant, then the P/E can be interpreted as the number
of years it will take for the company to pay back the amount paid for the share. Investors often
look at this ratio as it gives a good sense of the value of the company, and helps them analyze
how much they should pay for a stock based on its current earnings.Moreover, if the growth and
level of earnings of the company remain constant, then the P/E can be interpreted as the number
of years it will take for the company to pay back the amount paid for the share. Investors often
look at this ratio as it gives a good sense of the value of the company, and helps them analyze
how much they should pay for a stock based on its current earnings. The formula and calculation
used for this process are as follows:
P/E Ratio formula = Market Price per Share / Earning per Share

b. Price-to-book value
The price to book ratio, also called the P/B or market to book ratio, is a financial valuation
tool used to evaluate whether the stock a company is over or undervalued by comparing the price
of all outstanding shares with the net assets of the company. Therefore, A company with high PB
ratio is considered as growth stock whereas company with low PB ratio is considered as value
stock.

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In other words, it’s a calculation that measures the difference between the book value and the
total share price of the company. This comparison demonstrates the difference between the
market value and book value of a company. The market value equals the current stock price of
all outstanding shares. This is the price that the market thinks the company is worth. The book
value, on the other hand, comes from the balance sheet. It equals the net assets of the company.
Investors and analysts use this comparison to differentiate between the true value of a publicly
traded company and investor speculation. For example, a company with no assets and a visionary
plan that is able to drum up a lot of hype can have investors drooling over it. Thus, causing the
stock price to increase quarter over quarter.
The book value of the company hasn’t changed though. The business still has no assets. The
formulate to calculate PB ratio is as follow:

P/B Ratio formula = Market Price per Share / Book Value per Share

1.6.1.6 Value Premium

When value stocks outperform growth stocks within a particular setting, it is said that a (positive)
value premium, or value-growth spread exists. This “value-effect” was first acknowledged by
Graham and Dodd (1934) who examine value and growth stocks during the great depression.
The value premium refers to the (positive) difference between the returns obtained from portfolio
composed of value stocks and portfolio composed of growth stocks (Capaul et al, 1993). This
premium is important since the outcome refers to whether investors are more contended in
purchasing value stocks or growth stocks. The higher value premium, the more likely it is that
investors give preference to value stocks due to the providence of higher returns compared to
growth stocks (Bird and Casavvechia, 2007). When this figure lies around zero, it would indicate
the indifference on the purchase of value or growth stocks.

1.6.1.7 Bull, Bear and Sideways Market

In general, the stock market is divided into 2 types: the market is upward. Or better known as the
Bull Market and the down market or the bear market. In addition, there is another market, that
not go up or go down that much and there is no clear adjustment direction. We will call it a
Sideways Market.

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The reason that the market called the bull and the bear is because of posture when they fight.
Bull, when it's fighting, it will gore up. Like the stock price soaring. While the bear is fighting It
will use the hand to paw down. Like the stock price that fell.

If the stock market is in a bullish state, all factors will look good, such as economic conditions
and profitability of listed companies is growing Investors have confidence in investing and has a
large volume of stock trading. On the other hand, if it is a bear condition, it will be the period
when the "economic downturn" fundamentals and the period when investors start "not
confident".
The stock market is sensitive. Also, the government's policy regarding stock market stimulation
may not be clear. And how do we know that now is a bull market or a bear market

Stock market conditions will be a reflection of the goods market. If the market situation is good,
will result in a thriving stock market, but in fact, the factors that indicate that the stock market is
in a thriving phase are many.

In bullish scenario, the economic condition of country is in better situation; the investment of the
company and various businesses expands, the interest rate is at the level that good for
investment, high exports, profitable business operators. The state has provided adequate facilities
to entrepreneurs. Foreign investors invest a lot of money, Peaceful political situation both
domestic politics and foreign politics and Stock market forecasts are in a good way. If the stock
market has risen with the characteristics as mentioned above, should believe that the market is in
an uptrend. Which is the right term for investment. However, investors still need to analyze
various factors and always complete before investing.

On the other hand, the market condition is sluggish, also known as the bear market. Stock price
index decreased or have a continuous downward. In bearish situation the economic situation of
the country is depressing. Business investment is minimal. Sluggish trade market conditions. The
performances of various companies have reduced profits. Many industrial investment projects
must postpone or abolish foreign investment. The stock market forecast is negative. Investors do

19
not want to invest in shares. But investing money in safe assets or bank deposit causing trading
conditions to decline. Stock markets in foreign countries tend to be lower as well. The investors
can see from the index of important foreign stocks. Because the investment in foreign markets
will affect the Nepalese stock market more or less.

By investing strategy, if it is a bull market, we can invest in high-risk assets. However, investors
must be careful about price chasing. Making it possible to buy stocks that are more expensive
than the reality. Therefore, analyzing the fundamentals of stocks. It is also something that
investors need to focus on.

If it is a bear market, it means that investors should hold more cash than risky assets.
Wait and see the situation until the market is recovering. Which is a strategy that focuses on
preventing loss. However, there is one interesting strategy for looking at stocks during the bear
market, i.e., investing in Value Stock. Which is an investment approach that focuses on investing
in businesses that investors believe that the stock price is lower than the underlying value. By
analyzing various accounting values or financial ratios, such as book value, share price, profit
per share, Price-to-Earnings Ratios, the proportion of share, Price-to-Book Ratios, or Dividend
Yields. If the investor has regularly analyzed the investment stocks in a sluggish market
condition, may be an opportunity for you to buy good quality stocks at a reasonable price.

For the investment strategy in the Sideways market, investors should choose to invest in
businesses that grow even when the economic conditions are not favorable. For example, the
company is in an industry that is still growing in the future. The company's performance is
stable, not volatile, even though the economic conditions are "bad" or can call it a "defensive"
stock. Which is why we must choose high-quality stocks. Because the quality will guarantee that
the company will be able to overcome obstacles. And when the obstacles passed It will quickly
grow again. In addition, we should choose stocks that have good returns in the form of
dividends. Because this dividend will reduce the risk that we can have been less damaged in the
time that the stock market is going down. The return on dividends is extremely important in
investment. Because during the period when the market is not good or there is no trend

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Dividends may be considered more than 90% of all returns. And no matter what the market is
valuation for individual stock selection Is something that will give investors a better return than
the market.

1.6.1.8 Volatility
Volatility is the rate at which the price of a stock increases or decreases over a particular period.
Higher stock price volatility often means higher risk and helps an investor to estimate the
fluctuations that may happen in the future.

According to the Board of Governors of the Federal Reserve System (America’s central bank):
“Market risk encompasses the risk of financial loss resulting from movements in market prices.”
The European Banking Authority (EBA) defines market risk as the risk of losses on-and-off
balance sheet positions that occur as a result of adverse movements in market prices. “From a
regulatory perspective, market risk stems from all the positions included in banks’ trading book
as well as from commodity and foreign exchange risk positions in the whole balance sheet,” the
EBA adds. The majority of investors know that investing comes with risks as well as rewards,
and that, overall, the greater the risk, the bigger the potential reward.

Volatility is the standard deviation of a stock’s annualized returns over a given period and shows
the range in which its price may increase or decrease. If the price of a stock fluctuates rapidly in
a short period, hitting new highs and lows, it is said to have high volatility. If the stock price
moves higher or lower more slowly, or stays relatively stable, it is said to have low volatility.
Historic volatility is calculated using a series of past market prices, while implied volatility looks

Volatility is not always a bad thing, as it can sometimes provide entry points from which
investors can take advantage. Downward market volatility offers investors who believe markets
will perform well in the long run to buy additional stocks in companies that they like at lower
prices. A simple example may be that an investor can buy a stock for NPR 50 that was worth
NPR 100 a short time before. Buying stocks in this way lowers your average cost-per-share,
which helps to improve your portfolio’s performance when markets eventually rebound.

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The process is the same when a stock rises quickly. Investors can take advantage of this by
selling out, the proceeds of which can be invested in other areas that represent greater
opportunity. Investing when markets are volatile, and valuations are more attractive, can give
investors the potential to generate strong, long-term returns.

1.6.2 Review of previous works

As mentioned earlier there are a number of research articles that investigate the concept of value
and growth stocks and which of the stocks that generates the highest return. Many of these
studies have studied the bigger markets such as the U.S Market, the U.K Market and global
market. As per my knowledge there is too has not been any study that has focused Nepal Stock
market as mentioned in our research gap. There are number of research conducted in the related
field in and out of the country. Some of them are:

Lakonishok et al (1994) conducted research on US. PE, PB and PC ratio were used for the study.
The study found that Value strategies yield higher returns because these strategies exploit the
suboptimal behavior of the typical investor and not because these strategies are fundamentally
riskier.

Basu (1975, p. 53-64) was one of the earliest researchers to test low P/E stocks in order to see
whether they outperformed high P/E stocks on the New York Stock Exchange between the years
1956 to 1969. The results were that low P/E stocks consistently outperformed high P/E stocks
and earned abnormal returns.

Fama and French (1992, p. 427-465) conducted research on the New York stock exchange on the
accuracy of the beta and how company size and price to book ratios effected the returns. The
study was conducted during the years 1963 to 1990 and showed that low price to book ratios had
a better performance than high price to book ratios. Furthermore, the company size also seemed
to affect the returns.

Hoekjan (2011) conducted research on US. PE, PB and PC ratio were used for the study. The
study found that There exists a positive value-growth spread for at least two of the three price-

22
ratios on which value and growth stocks are classified. However, the results are too small and
statistically insignificant to insinuate the existence of a global value premium.

Cameron Truong (2009, p. 1-7) conducted a study on the New Zealand Stock Exchange over the
time period 1997-2007 investigating if a value premium exists. The price-to earnings- ratio is
used and the conclusion that is drawn is that low PE stocks outperform high PE stocks in New
Zealand meaning that stocks that are considered to be value stocks once again are performing
better than growth stocks.

Truong (2009, p. 1-7) investigated if a value premium existed on the stock exchange of New
Zeeland and using the P/E ratio as a measure showed that value stocks were performing better
than growth stocks.

Previous studies on growth and value stocks made internationally have concluded that there is a
value premium in the US market (Lakonishok, Shleifer, & Vishny, 1994, Fama & French, 1996,
and Chan & Lakonishok, 2004). Other studies have found this premium to exist also outside the
North-American market (Chan, Hamao, & Lakonishok, 1991 and Fama & French, 1998.

Fama & French (1998) argue that using price-to-book as a classification tool provide an investor
higher return than classifying portfolios by other multiples. This was also acknowledged by
Bauman et al (1998) and Davis & Lee (2008). Fama & French (1998) and O’Shaugnessy (2005)
argue that portfolios classified by means of price-to-book provide a higher return than other
multiples due to the level of volatility.

1.7 Research Methodology

The techniques or the specific procedure which helps to identify, choose, process, and analyze
information about a subject is called Research Methodology. It allows the readers to evaluate the
validity and reliability of the study in the research paper. In simple words, it describes what you
did and what made you reach this obtained result. It is practical to know ‘how’ the given
Research or any specific piece of Research was done. How a researcher designs a comprehensive

23
study to get a reliable outcome which justifies the objectives of the course can be figured out by
research methodology.
The methodology section should confirm that the selected methods are the best methods to get
reliable and valid results to justify the aims and objectives of the Research. It is of utmost
importance to choose the right way so that the work of the Research must be accurate. Briefly,
the systematic way to find out the solution to a problem is Research Methodology. The
procedure carried out by researchers to go about their work of explaining and predicting
occurrences. Providing the work plan to Research is the aim of Research Methodology. The role
of Methodology is to help in deciding the best method to resolve the difficulties for Research.
Research Methodology describes how efficient the method is in solving the problem and aids to
know the accuracy of the way decided to apply in Research for a suitable outcome.

1.7.1 Research Design

Research design is the framework of research methods and techniques chosen by a researcher.
The design allows researchers to hone in on research methods that are suitable for the subject
matter and set up their studies up for success. The design of a research topic explains the type of
research (experimental, survey research, correlational, semi-experimental, review) and also its
sub-type (experimental design, research problem, descriptive case-study). 

There are three main types of designs for research: Data collection, measurement, and analysis.
The type of research problem an organization is facing will determine the research design and
not vice-versa. The design phase of a study determines which tools to use and how they are used.
Impactful research usually creates a minimum bias in data and increases trust in the accuracy of
collected data. A design that produces the least margin of error in experimental research is
generally considered the desired outcome. The essential elements are:
1. Accurate purpose statement
2. Techniques to be implemented for collecting and analyzing research
3. The method applied for analyzing collected details
4. Type of research methodology
5. Probable objections for research
6. Settings for the research study

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 7. Timeline
8. Measurement of analysis

Quantitative data is used in this research. First, the stocks are classified into Growth, Medium,
and Value categories by its P/E and P/B ratio. So, there are three groups of categories. A stock is
classified as Growth if its ratio is in the top one-third of the reference period and classified as
Value if its ratio is in the bottom one-third of the reference period. A stock is classified as
Medium if its ratio is in the middle one-third of reference period. The portfolios categories
formed is then evaluated annually.

The design was quantitative in nature because the study analysed the comparative performance
and attributes of four portfolios, using the revised one variable Lakonishok et al. (1994)
methodology. The data used to create and analyse portfolios was obtained from Bloomberg. To
duplicate Lakonishok et al. (1994) in South Africa, we needed to acknowledge that there are
major differences between a developed market, such as the United States of America and an
emerging market, such as South Africa. Lakonishok et al. (1994)’s methodology only included
the largest 50% of firms by market capitalisation.

The ranking is performed at the start of each period. The agreed upon start date for each period is
April 1st. The reasoning behind preparing portfolio at beginning of Shrawan as opposed to the
1st of Baisakh is to ensure that all companies have published their financial statements for the
previous fiscal year. A further reason for not purchasing shares on the 1st of Baisakh is that the
Baisakh effect has been previously documented, and we wish to eliminate the possibility of any
outside factor affecting the results to the greatest possible degree.

1.7.2 Research Variables

The research intends to achieve goals. To pursue the goals, variables that make the process of
goal setting possible to identify which results in the achievement of the goals.
Therefore, research means the measurement of the variables and the importance of the variable is
hidden in this concept. Basically, the variables should be determined in accordance with their
purpose and components. In other words, the variables should be selected through operational

25
words and research literature. Price-to- earnings (P/E) and Price-to-book (P/B) are the variables
used in this study to study return and risk in growth and value stocks listed in NEPSE.

The price to earnings ratio (PE Ratio) is the measure of the share price relative to the annual net
income earned by the firm per share. PE ratio shows current investor demand for a company
share. It can be used to compare a company against its own historical record or to compare
aggregate markets against one another or over time. The formula and calculation used for this
process are as follows:
P/E Ratio formula = Market Price per Share / Earning per Share

The Market to Book Ratio (also called the Price to Book Ratio), is a financial valuation
metric used to evaluate a company’s current market value relative to its book value. The market
value is the current stock price of all outstanding shares (i.e., the price that the market believes
the company is worth). The book value is the amount that would be left if the company
liquidated all of its assets and repaid all of its liabilities. The formulate to calculate PB ratio is as
follow:

P/B Ratio formula = Market Price per Share / Book Value per Share

1.7.3 Separation of value and growth stocks

A stock is considered a growth stock when it’s growing faster and higher than stocks of other
companies with similar sales and earnings figures. Usually, the growth of a company is
compared with growth from other companies in the same industry or compare it with the stock
market in general. Growth stocks come with higher metric ratios, like P/E ratio, P/B ratio,
and earnings per share (EPS). Growth stocks carry relatively lesser risk because their growth rate
is high and increasing. They are relatively less sensitive to adverse economic conditions than the
overall market. Hence, growth stocks are relatively less risky investments.

Value stocks are stocks that are priced lower than the value of the company and its assets. It is
identified by analyzing the company’s fundamentals and looking at some key financial ratios,
such as the price-to-earnings ratio and price-to-Bok ratio. If the stock’s price is lower than the
company’s fundamentals indicate it should be (in other words, it’s undervalued), then it’s a good

26
buy — a bargain — and the stock is considered a great value. Value stocks are those that tend to
trade at a lower price relative to their fundamentals (including dividends, earnings, and sales).
Value stocks generally have low current price-to-earnings ratios and low price-to-book ratios.

1.7.4 Portfolio construction of value & growth stocks

In the world of investing, building a balanced portfolio is an important job — and an art.
investment portfolio refers to all the investments investor own, including the stocks, bonds,
mutual funds, and exchange-traded funds that you have in your retirement, brokerage, and other
accounts. Having a balanced portfolio is essential to manage market risk and achieve long-term
goals. There are a number of methods that could be used to classify stocks according to style.
Lakonishok et al. (1994) used both one variable and two variable methods to define growth or
value stocks. Nepal is small market with some 160 companies in the All share compared to the
6000 stocks that Lakonishok et al. (1994) used for their analysis for the United States of
America. That said, this study used the two variable method is used in this study, price to
earnings and price to book.
The sample is divided into two portfolios based on two variables to compare the performance of
value and growth stocks. One portfolio will consist of value stocks and the other of growth
stocks. The portfolios are based on two variable, P/E and P/B Ratio. Portfolios are created for
each one of the years 2068/69-2077/78 and for each year there will be two portfolios based on
the P/E and two on the P/B. This will in total result in 18 different portfolios, 9 of them are
growth stock portfolios and 9 are value stock portfolios. This means that the portfolios are held
for one year and after each year a new portfolio is created. The one year holding period has been
used in various studies such as Lakonishok et al (1994) and Fama & French (1998) studies. The
reason for creating new portfolios every year is since the financial ratios can change rather
drastically over time and in-between years.

In order to rank stocks as either value or growth, various scholars use country index cut-offs. The
most widely used cut-offs are 25 percent (see e.g., Capaul et al, 1993, Athanassakos, 2009) and
30 percent (see e.g., Fama & French, 1998; Bird & Casavecchia, 2007). This means that in an
index, the 25 or 30 percent of stocks with the lowest (highest) multiples are characterized as
value (growth) stocks. This means 25% of the stocks with the highest ratios are placed in the

27
portfolio of growth stocks and 25% of the stocks with the lowest ratios are ending up in the
portfolios consisting of value stocks. The remaining 50% of the stocks are left out of the study
since they are viewed as neutral stocks.
Due to academic justification, a 25 percent cut-off is used in this report. When an index cannot
be divided in equal numbers of stocks, the numbers of stocks are rounded to the closest number
above (for example, 10.5 = 11). The figure below shows how the portfolios are created:

Index
(44 Stocks)

Portfolio with high P/E and P/B Neutral Portfolio (50% stocks) Portfolio with low P/E and P/B

25% stocks 25% stocks 25% stocks 25% stocks

with high PE with high PB with low PE with low PB
(Growth (Growth (Growth (Growth
Stocks) Stocks) Stocks) Stocks)

Figure 1. Method of portfolio Creation

1.7.5 Portfolio returns of value & growth stocks

Return on investment refers to total returns over the period for which an investment was held,
usually expressed in percentage of initial investment, and is widely used for comparing returns
from various investments held for different periods of time. It also captures any additional
income from the investment apart from helping calculate the growth or decline in value over
multiple periods. Investors all face a trade-off between risk and return. Investors are rewarded
with returns for taking on risk – but that risk must be managed. For any portfolio, an investor

28
must determine the appropriate level of risk. And then the portfolio risk needs to be calculated to
make sure it lies within that level of risk. The calculation of return is based on below formula:

Return = ((Dividend + (value at year end - original value)) / original value)

1.7.6 Portfolio return per unit of risk

The very nature of investing implies that all growth and profit come at the expense of risks of an
investor. Being able to quantify the risk of a portfolio allows investors to optimize potential
returns. The more risk can be quantified and managed, the more capital can be allocated to
riskier assets that generate the highest returns. There are mainly two types of risks that affect
investments: systematic and unsystematic risks. Systemic risk can be seen as the probability of a
loss associated with the entire market or a portion. Therefore, unsystematic risk refers to the
possibility of a loss within a particular industry or protection. Systematic risk implies other
investment-related risks, such as risks related to the industry.The opposite of systemic risk,
unsystematic risk, has an effect on a very particular securities group or individual security.
Diversification may help to mitigate unsystematic risk.

A risk-adjusted return is a measure that puts returns into context based on the amount of risk
involved in an investment. In short, the higher the risk, the higher return an investor should
expect. So, Sharpe’s measure is used to understand return of an investment compared to its risk.
The Sharpe ratio calculates how well an investor is compensated for the risk they’ve taken in an
investment. When comparing two different investments against the same benchmark, the asset
with the higher Sharpe ratio provides a higher return for the same amount of risk or the same
return for a lower risk than the other asset. Developed by American economist William F.
Sharpe, the Sharpe ratio is one of the most common ratios used to calculate the risk-adjusted
return. Sharpe ratios greater than 1 are preferable; the higher the ratio, the better the risk to return
scenario for investors.

Sharpe Ratio = (Rx – Rf) / StdDev Rx

where:
Rp = Expected Portfolio Return

29
Rf = Risk-free Rate
Sigma(p) = Standard Deviation of the Portfolio’s Excess Return

1.7.7 Risk-free Rate

Investors need to be aware of every term and phrase when it comes to the share market. Staying
updated with the current trends and deciding to invest in different types of investment options is
a great practice. While several investors know many terms and their meaning, there’s one term
that most investors have often heard of but don’t have an exact idea about what this term means
and that the term is a risk-free rate of return.

Risk-free rate of return is an imaginary rate that investors could expect to receive from an
investment with no risk. Although a truly safe investment exists only in theory, investors
consider government bonds as risk-free investments because the probability of a country going
bankrupt is low.

In practice, however, a truly risk-free rate does not exist because even the safest investments
carry a very small amount of risk. Thus, the interest rate on a three-month Treasury bill (T-bill)
is often used as the risk-free rate for investors. The three-month Treasury bill is a useful proxy
because the market considers there to be virtually no chance of the government defaulting on its
obligations. The large size and deep liquidity of the market contribute to the perception of safety.
Treasury bill, generally the safest investment an investor can make. The data for the risk-free rate
are collected from Economic Bulletin published by NRB and is presented in the table below.
Table 1

Risk free Rate

Year Risk Free Rate %
2006/07 2.42
2007/08 4.22
2008/09 5.83
2009/10 6.5
2010/11 7.41
2011/12 1.31

30
 2012/13 1.74
2013/14 0.13
2014/15 0.43
2015/16 0.79
2016/17 1.45
2017/18 4.48
2018/19 3.2
2019/20 2.69
2020/21 2.19
Source: Economic Report of Nepal Rastra Bank
1.7.8 Comparing return with benchmark
Investors use indexes and averages as benchmarks, or yardsticks of investment return. These
benchmarks can help to evaluate the performance of the overall market, particular market sectors
and industries, individual securities, mutual funds, and ETFs. Since there’s no absolute measure
of investment performance, comparing investment return to benchmarks is really the only way to
evaluate your results for example, suppose portfolio stocks gained 8% in a particular year. That
might seem fine. But if the NEPSE gained 15%, that means investor’s portfolio return
underperformed its benchmark by a wide margin. NEPSE is only stock index in Nepal and it
includes all the listed stocks, the benchmark can be a good representation of Nepalese stock
market. The NEPSE has no frictional costs. When used as a benchmark, it is an imaginary bucket
of stocks held in a free portfolio with no trading costs and no capital gains taxes. The portfolio
formed in this study also do not have frictional cost. so, it is fair to compare the returns of
portfolio and NEPSE.

1.10 Limitation of the study

In this report, I studied the subject of value and growth stocks in relation with return, risk, and
overall performance by using two of the most frequently used fundamentals, the Price-to-
Earnings ratio (P/E) and Price-to-Book ratio (P/B) on future returns. The findings that will be
discussed in the empirical section, may raise a number of critical questions about my research,
the performance of value and growth stocks. In this section, the major limitations of my research
as well as the implications for future research are discussed.

31
First, the data and information provided on this study is not advice, professional or otherwise,
and should not be relied upon as such. Neither the information, nor any analysis contained in this
study constitutes a solicitation or offer to buy or sell any securities or other financial instruments
or provide any investment advice or service. The investments result presented in the market
analysis, research reports, etc. may not be applicable in market as the market is not always driven
by fundamental factors. Investors must make their own investment decisions based on their
specific investment objectives and financial position and only after consulting such independent
advisors as may be necessary.

Second, Cashflow Data of Sample taken for study were not available in various financial
websites and this may have skewed the result presented in this report. The optimal solution
would instead have been to collect the data for the ratios manually from the company’s annual
reports, however this could not be done due to time limitations we had.

Third, one of the major limitations concerning the research within this thesis is the sample size
used. Sample size is very low. Only 44 Banks and Development Bank were considered for this
study which is by far less than the large sample size used by other scholars.

Fourth, transaction costs and taxes are not calculated while buying and selling stocks. While the
hypothetical value investing strategies used for this research could be profitable on paper, it
could be unprofitable when applied in real life. Rebalancing a portfolio of many stocks brings
about high transaction costs and taxes. An investor could consider reducing the transaction costs
by increasing the holding period from one year to two years.

Fifth, if there would have been more time it would have been both interesting and appropriate to
use and test more than one measurement for risk-adjustment. In this paper we used the Sharpe-
ratio but measures such as Treynor measure and Jensen’s alpha would have been good to
include.

32
 CHAPTER-II

RESULTS AND ANALYSIS

2.1 Data presentation

2.1.1 Sample
2.1.1.1 Sample Period
The sample portfolio created in this report will cover the period from beginning of Shrawan 2068
to 2078 Asadh end.  This time period of 10 year is enough to observe all three types of market
trend -up, down, and sideways, answer all the Research question and full the Research objective.
A trend is the general direction at which the stock is moving. Based on whether the market is
bullish or bearish, the trends move upwards or downwards. There is specified duration for a
movement to be considered a trend, however, the longer the trend moves (either upward or
downward), the more noteworthy the trend becomes. The key determinant of whether the market
is up, down or sideways is not just the market's knee-jerk reaction to a particular event, but how
it's performing over the long term. Small movements only represent a short-term trend or a
market correction. Whether or not there is going to be a bull market or a bear market can only be
determined over a longer time period.

33
It is critical to investigate how growth and value stocks perform and thus, attempt to understand
these performance characteristics in different market conditions. The stock market of Nepal has
been through several booms and bust in past 10 years taken for this study. There has been
bullish market from 2068/69-2072/73 and 2076/77-2077/78 and bearish market in period
2073/74 to 2075/76. However, market showed quick up-move after the crash and is moving
forward in positive direction in long run. This can be clearly seen in the chart below. The bullish,
bearish and sideways phases in 10-year study time period will help to be aware of performance
of value and growth stocks in Nepal Stock Exchange. Table 2 and Figure 2 represents tabular
and graphical representation on bullish and bearish period.

Table 2

Bullish and Bearish Periods

Bullish Periods Bearish Periods Bullish Periods
Year 2068/69-2072/73 2073/74-2075/76 2076/77-2077/78
Source: Investopaper website

Figure 2. NEPSE performance 2068/69-2077/78

34
2.1.1.2 No. of stocks used to prepare portfolio
This research was aiming to use stocks all the stocks listed in NPESE but only financial firms
(Commercial Bank and Development Bank is involved in population of this research which
Fama and French (1992) exclude from their analysis. The reason for not using all the Stocks and
going for Banking and Development Bank stocks is due to unavailability of data of the stocks.
There was no data available of companies from other sectors and they were eliminated from the
population. In that, Price to Earning and price to Book have similar meaning for all companies
either it is similar for financial and non-financial firms. More detailed information is presented in
table 3 below:

Table 3

Number of samples taken in each year

Year Number of stocks used to prepare portfolio each
year

2068/69 22
2069/70 26
2070/71 35
2071/72 36
2072/73 35
2073/74 41
2074/75 43
2075/76 43
2076/77 39
2077/78 38

35
2.1.1.3 Research Population and Samples
Previous researchers focused their work on aspects of measurement-driven instruction and high-
stakes testing of overall market index. However, to my knowledge, overall market is not studied.
Through this study, I sought to study only two type of companies: Commercial Bank and
Development Bank that have been studied due to time and data limitation. All the companies
listed in NEPSE between the time period from 2068/69 to 2077/78 is population. However, there
are 44 selected sample for this study. Below table presented the list of Stocks in Nepal Stock
Exchange used as samples in this research.

Table 4

List of Samples used in the Research

S.N. Script Company
1 ADBL Agricultural Development Bank Limited
2 BOKL Bank of Kathmandu Limited
3 CCBL Century Commercial Bank Limited
4 CZBIL Citizens Bank International Limited
5 CBL Civil Bank Limited
6 EBL Everest Bank Limited
7 GBIME Global IME Bank Limited
8 HBL Himalayan Bank Limited
9 KBL Kumari Bank Limited
10 LBL Laxmi Bank Limited
11 MBL Machhapuchchhre Bank Limited

36
12 MEGA Mega Bank Nepal Limited
13 NABIL Nabil Bank Limited
14 NBB Nepal Bangladesh Bank Limited
15 NBL Nepal Bank Limited
16 NCCB Nepal Credit & Commerce Bank Limited
17 NIB Nepal Investment Bank Limited
18 SBI Nepal SBI Bank Limited
19 NICA NIC Asia Bank Limited
20 NMB NMB Bank Limited
21 PRVU Prabhu Bank Limited
22 PCBL Prime Commercial Bank Limited
23 SANIMA Sanima Bank Limited
24 SBL Siddhartha Bank Limited
25 SCB Standard Chartered Bank Nepal Limited
26 SRBL Sunrise Bank Limited
27 CORBL Corporate Development Bank Limited
28 EDBL Excel Development Bank Limited
29 GBBL Garima Bikas Bank Limited
30 GRDBL Green Development Bank Limited
31 JBBL Jyoti Bikash Bank Limited
32 KSBBL Kamana Sewa Bikas Bank Limited
33 KRBL Karnali Development Bank Limited
34 LBBL Lumbini Bikas Bank Limited
35 MLBL Mahalaxmi Bikas Bank Limited
36 MDB Miteri Development Bank Limited
37 MNBBL Muktinath Bikas Bank Limited
38 NABBC Narayani Development Bank Limited
39 SHBL Sahara Bikas Bank Limited
40 SAPDBL Saptakoshi Development Bank Limited
41 SADBL Shangrila Development Bank Limited

37
 42 SHINE Shine Resunga Development Bank Limited
43 SINDU Sindhu Bikas Bank Limited
Source: Sharesansar Website

2.1.2 Data
A statistical investigation deals with large mass of inter-related facts in the form of numerical
figures. These information in the form of numerical figures is generally termed as data. Whereas
sometimes data can be in the form of general description or elaboration too. On the basis of
method and sources by which the data is collected the data is classified into two types:- Primary
Data and Secondary Data. Those data which are collected afresh and for the first time and thus
happen to be original in character and known as Primary data. These data are in the shape of raw
material. Those data which have been collected by someone else and which have already been
passed through the statistical process or analyzed by someone else are known as Secondary data.
It is the data which may be published or unpublished, but has been collected and is used for some
other purpose earlier. For this research study, Secondary data collected from different sources is
processed to fulfill the research question and objectives. This includes Year-end Stock prices,
Earning per share, Book value and risk-free rates.

2.1.2.1 Financial Data

This section deals with sources for financial information of a company. Also, databases and
sources for investment information can be helpful because they often contain financial
information in a concise form. There were around five different attributes that needed to be
downloaded yearly of ten-year time period to be able to make the necessary calculations.
Financial attributes needed for this study is found on the company’s web pages in investor
relations where Securities exchange and other company reports are kept. Additional help in
collection of financial data was obtained Merolagani website and Sharesansar website. These
two websites have this data (Dividend, EPS and Book value) in their database. The amount of
data was substantial and not everything could be verified so the data might include some false
figures but this information source is still probably the most reliable to use. Data used in this
research are secondary data as follows:
a. Historical prices data for each sample during the research period

38
b. Earnings per Share (EPS) for each sample during the research period
c. Total Assets for each sample during the research period
d. Intangible Assets for each sample during the research period
e. Total Liabilities for each sample during the research period
g. Total shares for each sample during the research period

2.1.2.1 Stock quotes and Risk-free Rates

At Sharesansar.com and Merolagani.com, stock quotes and up-to-date news and market data is
available at free of cost. The data for the risk-free rate are collected from Economic Bulletin
published by NRB.

2.2 Analysis of Results

In an empirical research paper, the purpose of the Analysis section is to interpret the results and
discuss their implications, thereby establishing (and often qualifying) the practical and scholarly
significance of the present study. It may be helpful to think of the Analysis section as the inverse
of the introduction to an empirical research paper. The aim of this study was to determine the
superiority between growth and value portfolios based on different price multiple in overall
market and in different market condition; bullish and bearish market. This section is divided into
different sections. This chapter starts with presentation of the analysis of pure return followed by
risk adjusted return. The performance of portfolios is also in bullish and bearish cycle is also
studied in this part.

2.2.1 Descriptive Statistics

Descriptive statistics are brief descriptive coefficients that summarize a given data set, which can
be either a representation of the entire population or a sample of a population. Descriptive
statistics are broken down into measures of central tendency and measures of variability (spread).
Measures of central tendency include the mean, median, and mode, while measures of variability
include standard deviation, variance, minimum and maximum variables, kurtosis, and skewness.
For this study, the raw financial data of sampled companies are collected and processed to
understand the concepts and research question regarding this study. Two variables namely, price
to Price -to -earning and price -to -book is used to categorise stocks into different styles, namely

39
Growth and Value stocks. The standard deviation, mean and median of portfolios returns is
calculated and studied in this research.

The table 5 below shows, no. of screened stocks included in portfolio (growth and value) based
on P/E and P/B ratio. The growth portfolio is composed of stocks that belongs to quartile 1 (the
highest 25%) whereas value portfolio consist of stock among the quartile (the lowest 25% of
stocks) of the sample while ranked according to the price to earning and price to book ratio.The
mean and median of portfolios as well as the standard deviation is presented in the table.

In order to get insight between volatility of growth and value stocks, Standard deviation of all the
stocks that fulfilled the criteria is calculated.  Moore et al. (2009, p.40) explain that the standard
deviation measures the spread by looking at how far the observations are from their mean.
Further they argue that in finance, it is common to use the standard deviation of the returns when
measuring risk. If the spread of an investment is large from year to year it means that it is more
unpredictable and therefore more risky than returns that show a small spread. Value stocks are at
least theoretically considered to have a lower level of risk and volatility associated with them
because they are usually found among larger, more established companies. And even if they
don’t return to the target price that analysts or the investor predict, they may still offer
some capital growth, and these stocks also often pay dividends as well. Whereas Growth stocks,
in general, possess the highest potential reward, as well as risk, for investors and have high
standard deviation compared to growth portfolio.

There is noticeable difference between mean, median and standard deviation of Growth portfolio
and Value portfolio. The central tendency and standard deviation of growth stock based on both
price multiple used in this study is typically higher.  This is due to investor’s willingness to pay a
higher share price today because of growth expectations in the future. The high average mean
and median price multiple indicates that investors expect higher growth from the
company compared to the overall market. A high PE and PB does not necessarily mean a stock is
overvalued and low PE and Pb does not necessarily mean a stock is undervalued.

40
The large standard deviation of of Growth portfolio based on PE measure over the years indicate
that high PE based portfolios is more volatile than PB based portfolios. The wide distribution of
standard deviation in the high Price multiples portfolio implies that it is more volatile and riskier
to invest in such firms because although the market expects high Price multiples firms to have
high future growth, the outcome can be unpleasant because some firms achieve low profitability
in subsequent years. In that when standard deviation between the portfolios based on same price
multiple is compared, it observable that Growth portfolio tend to have higher standard deviation
than value portfolio implying high volatility and riskier for investment.

Table 5

Descriptive of Growth and Value Portfolio

Year No of Stock Mean Median Standard Deviation
G=Growth PE PB PE PB PE PB PE PB
V=value
2068/69 G 6 6 - - - - - -
V 6 6 - - - - - -

2069/70 G 6 6 29.17 4.96 26.76 5.01 8.56 1.09

V 6 6 8.14 1.38 9.23 1.47 3.25 0.40

2070/71 G 6 6 63.92 7.36 39.13 7.56 46.97 1.71

V 6 6 15.58 2.45 17.29 2.72 5.43 0.87

2071/72 G 9 9 35.45 5.04 29.83 4.17 12.63 1.37

V 9 9 11.43 2.05 12.44 2.21 2.86 0.31

2072/73 G 8 8 46.38 8.86 39.53 8.61 15.90 2.91

V 8 8 16.76 2.67 18.59 2.61 4.28 0.68

41
 2073/74 G 9 9 41.77 5.70 39.33 6.14 9.85 1.57
V 9 9 12.83 1.93 13.63 1.95 4.37 0.65

2074/75 G 10 10 35.28 2.93 28.23 2.83 20.48 0.66

V 10 10 10.28 1.08 10.68 2.83 1.88 0.66

2075/76 G 11 11 24.47 2.74 17.44 2.73 15.67 0.44

V 11 11 8.89 1.16 9.35 1.18 1.67 0.09

2076/77 G 10 10 43.88 2.77 28.25 2.77 27.34 0.40

V 10 10 12.98 1.10 13.26 1.14 1.23 0.13

2077/78 G 10 10 108.78 4.49 45.48 4.32 164.78 0.87

V 10 10 20.12 2.40 20.47 2.50 2.35 0.24

2.2.1 Portfolio performance analysis

The full time analysis starts with interpreting the table and figure. The returns of portfolios are
presented in table and figures plots the return of portfolio of each year starting from 1 st Shrawan
1068 till the end of sample portfolio, 2078 Asadh end. The figures; trendlines and clustered
column is used to display the distribution of market trend and returns of portfolios based on price
multiples. They are used because they reveal properties about the returns of corresponding
portfolio in a way that summary statistics cannot and to compare them. The figures in this report
are in this report is presented in the simplest and most effective way.

In order to rank stocks as either value or growth, 25% cut-offs is used. This means 25% of the
stocks in population with the highest ratios are placed in the portfolio of growth stocks and 25%
of the stocks with the lowest ratios are ending up in the portfolios consisting of value stocks. The
remaining 50% of the stocks are left out of the study since they are viewed as neutral stocks.
Firstly, the results of non-risk adjusted returns of portfolios for the Price-to-Earning variable the
Price-to-Book variables will be presented followed by results of non-risk adjusted returns of
portfolios for the Price-to-Earning variable the Price-to-Book variables. Then the performance of
portfolios in bullish and bearish market is studied. The graphs and table consists of additional
NEPSE index and risk free rate along with return of respective portfolio to compare the returns
between the two corresponding portfolios of growth and value stocks and with overall market
return and risk free rate.

42
2.2.1.1Non-risk Adjusted returns
The Table 6 and figure 3 sets out yearly non-risk adjusted returns for the portfolios; growth and
value ranked according to PE ratio from F.Y 2068/69 to F.Y 2077/78 is presented. It is
noticeable that there is huge statistical difference in yearly return of growth and value portfolio
based on PE ratio. Value portfolio managed to outperform Growth portfolio six out of nine years.
So, it can be said that following price-to-earnings ratio (P/E ratio) has caliber to value a company
to gain extraordinary returns. The highest spread can be observed in 2070/71 where value stock
dominated growth portfolio by 92%. The lowest spread is -23% occurred in 2070/71 where
growth portfolio was successful to beat value portfolio. The highest gain of 135% belong to
Value portfolio in 2070/71 whereas highest loss of -51% is accounted by growth portfolio in
2074/75. Looking after the below table it can be said that value portfolio not only provided
consistent return but also higher average annualized pure return of 26% compared to 12%
average pure return of growth portfolio.

During Bearish period, the value portfolio based on PE also outperforms the growth in bearish
trend. Value portfolio faced negative 14.33% loss per year on average whereas in the same
bearish scenario growth portfolio posted negative 30.66% return on average per year. At the end
of bearish market growth portfolio was still performing in negative whereas value portfolio gave
15% annual return. This might be the case because the growth stocks most susceptible to falling
are those that are richly valued based on current or future profits. In addition, value stocks might
have outperformed the growth stocks (meaning they will fall, but not as much) because of their
lower P/E ratios and perceived earnings stability.

The table also describes the return of NEPSE index for the period 2068/69 to 2077/78. One of
the interesting details to look for is, the portfolios were not following the same direction as
NEPSE index in seven out of ten years. NEPSE experienced one of the major crashes during
2073/74 to 2075/76. However, it is astonishing that NEPSE posted positive return in two out of
three years of crash whereas the portfolios formed were following the bearish trend and posted
negative returns. Another interesting stat is when NEPSE gained more than 200%, 231% in
2071/72 and 209% in 2074/75, which is highest returns in ten years of study by large margin,

43
both growths failed to provide positive return and value portfolio earned only 2% annualized
return in 2071/72 whereas both the portfolios provided negative return in 2072/75. The return
stats from FY 2076/77 and 2077/78 is also quite amusing as NEPSE posted negative return in
bullish trend when positive return was expected. Both growth and value portfolio failed to beat
the average yearly non-adjusted return of NEPSE. The average annualized non-risk adjusted
return of growth and value portfolio is 12% and 26% compared to 54% of NEPSE.

Table 6

Return of Value and Growth portfolios based on PE

Year Growth return Value Return Spread NEPSE return
2068/69 - - - -
2069/70 33% 20% -13% 33%
2070/71 43% 135% 92% -93%
2071/72 -19% 2% 21% 231%
2072/73 68% 45% -23% 84%
2073/74 -38% -26% 12% 84%
2074/75 -51% -32% 19% 209%
2075/76 -3% 15% 18% -29%
2076/77 -2% 0.48% 2% -16%
2077/78 79% 73% -6% -19%

44
 Average return 12% 26% 54%
Source: Annual Report

Figure 3. Return of Value and Growth portfolios based on PE

In table 7 and figure 4 the summary of non-risk adjusted for the two investment portfolio
alternatives based on PB ratio is presented for comparison. It can be observed that the value
portfolio according to PB ratio outperformed growth portfolio in six out of nine years of study.
The highest value-growth spread between the portfolios of 26% can be observed in 2070/71
whereas lowest spread of -100% occurred in 2070/71. The highest return of 142% gained by
portfolio belongs to growth portfolio which occurred in 2077/78 whereas highest loss of -46% is
accounted by growth portfolio in 2074/75. Looking after the below table it can be said that even
though value portfolio provided consistent return it lagged behind growth portfolio when average
annual pure return is considered. Growth portfolio accounted higher average annualized pure
return of 21% compared to 13% of average pure return of value portfolio.

45
In order to extend and further investigate the non- risk adjusted return, the portfolios return is
compared with non-adjusted return of NEPSE index. The matrix of yearly NEPSE return can be
found in Table 5 for the period from2068/69 to 2077/78. It is interesting to observe the return of
portfolios not following the same direction as NEPSE index for six out of nine years. NEPSE
experienced one of the major bearish trends during 2073/74 to 2075/76. However, it is
astonishing that NEPSE posted positive return in two out of three years of crash whereas the
portfolios formed were following the bearish trend and posted negative returns. Another
interesting stat is when NEPSE gained more than 200%, 231% in 2071/72 and 209% in 2074/75,
which is highest returns in ten years of study by large margin, both growths failed to provide
positive return and value portfolio earned only 2% annualized return in 2071/72 whereas both the
portfolios provided negative return in 2072/75. Both growth and value portfolio failed to beat the
average yearly non-adjusted return of NEPSE. The average annualized non-risk adjusted return
of growth and value portfolio is 21% and 13% compared to 54% of NEPSE.

A bear market is when market index and prices of securities fall sharply, and a sweeping
negative view causes the sentiment to further entrench itself. As above said, it is really
interesting to witness the positive yearly return in crash period from 2073/74 to 2075/76 and
yearly negative return in bullish run in 2076/77 and 2077/78. However, the portfolios followed
the bearish trend and performed positively in bullish run and negatively in bearish run. During
Crash period, again the value portfolio outperformed growth portfolio. Value portfolio faced
negative 17% loss per year on average whereas in the same bearish scenario growth portfolio
posted negative 27.33% return on average per year.
Table 7

Return of Value and Growth portfolios based on PB

Year Growth Return Value Return Spread NEPSE return
2068/69 - - - -
2069/70 37% 44% 7% 33%
2070/71 41% 67% 26% -93%
2071/72 -20% -6% 14% 231%
2072/73 71% 25% -46% 84%
2073/74 -38% -26% 12% 84%

46
 2074/75 -46% -40% 6% 209%
2075/76 2% 15% 13% -29%
2076/77 -1% -2% -1% -16%
2077/78 142% 42% -100% -19%
Annual Return 21% 13% 54%
Source: Annual Report and Mero Lagani website

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Figure 4. Return of Value and Growth portfolios based on PB

2.2.1.1 Risk Adjusted returns

Table 8 and graph figure 5 compares the risk-adjusted returns of PE based portfolio. The value
portfolio still dominates the growth portfolio in risk adjusted return too. The highest spread in
risk adjusted returns where the value portfolio outperforms growth portfolio by 161.86% in year
2060/71. And the lowest in 2072/73 with negative spread of -61.1%. During the study period
value portfolio in 2070/71 has the best performance of 253.93% return according to Sharpe’s
ratio, while the portfolio in year 2074/75 has the worst performance with a negative value of -
119.15% according to Sharpe’s index. So, it is fair to say even though the returns are risk
adjusted the PE multiple still seems like a good indicator for superior returns.

Portfolio with Sharpe’s ratio greater than 100% is considered good enough for profitable
investment. In the year 2077/78, Growth portfolio and value portfolio both had risk adjusted
return above 100%. Growth portfolio posted 164.96% risk adjusted return whereas value
portfolio posted 133.32% return. Each portfolio fulfills the criteria of Sharpe’s ratio to get
invested. However, growth portfolio provided more return per unit of risk. The FY 2070/71 is
only the second year to provide risk adjusted return above 100%. Value portfolio accounted risk
adjusted return of 253.93% in 2070/71. So, it was another great year buy stock for profitable
return.

The table also allows to compare the return of NEPSE index and portfolios based on price
multiples for the period from 2068/69 to 2077/78. Risk adjusted return of NEPSE behaves
almost the way compared non-risk adjusted return of NEPSE. The risk adjusted return of NEPSE
in bearish downtrend is positive whereas it is negative in bullish trend starting after bearish trend
which is quite same as non-risk adjusted return. When compared with respect to risk adjusted
return, growth portfolio was successful to beat three out of nine years as compared to two out of
nine years of value portfolio. Even though growth portfolio outperformed NEPSE more times,
value portfolio gave more consistent return in nine years. The average annualized risk adjusted
return of growth and value portfolio is 22.17% and 45.06% compared to 49.12% of NEPSE.
Table 8

48
Risk adjusted yearly returns of portfolios based on PE ratio
Year Growth Value Value Premium NEPSE
2068/69 - - 0
2069/70 67.13% 34.38% -32.75% 29.96%
2070/71 92.07% 253.93% 161.86% -84.51%
2071/72 -41.73% 2.96% 44.68% 210.76%
2072/73 144.34% 83.24% -61.10% 76.45%
2073/74 -84.72% -51.68% 33.04% 76.29%
2074/75 -119.15% -68.68% 50.47% 190.81%
2075/76 -13.32% 22.22% 35.53% -26.12%
2076/77 -10.07% -4.16% 5.91% -14.58%
2077/78 164.96% 133.32% -31.64% -17.00%
Average return 22.17% 45.06% 49.12%
Source: Annual Report and Mero Lagani website

49
Figure 5. Risk adjusted return of portfolios based on PE ratio

Table 9 and figure 6 represents the risk-adjusted returns of PB based portfolio. It is quite
interesting to see Growth portfolio outperforming growth portfolio five out of nine years. In
short growth portfolio dominated value portfolio when compared on the basis of risk adjusted
return which was not the case with non-risk adjusted return and portfolios based on PE ratio. It is
observable that the highest returns in nine years is obtained by Growth portfolio of 233.5%
in2077/78 and lowest by Value portfolio of -124.5% in 2074/75. The highest value premium is
187.195 where the value portfolio outperformed growth portfolio by 118.93% is in year 2070/71.
And the lowest is -124.51% in 2074/75 where growth portfolio overshadowed value portfolio by
huge margin.

Portfolio with Sharpe’s ratio greater than 100% is considered good enough for profitable
investment. In the year 2077/78, Growth portfolio and value portfolio both had risk adjusted
return above 100%. Growth portfolio posted 233.5% risk adjusted return whereas value portfolio
posted 111.44% return. Each portfolio fulfills the criteria of Sharpe’s ratio to get invested.
However, growth portfolio provided more return per unit of risk. The FY 2069/70 and 2070/71 is
only the second and third year to provide risk adjusted return above 100%. Value portfolio
accounted risk adjusted return of 118.3% and 187.19% in those years. So, it was another great
year buy stock for profitable return.
Table 9

Risk adjusted yearly returns of portfolios based on PB ratio

Year Growth Value Value premium NEPSE
2068/69 - - 0
2069/70 58.89% 118.30% 59.41% 29.96%
2070/71 68.26% 187.19% 118.93% -84.51%
2071/72 -34.12% -18.00% 16.12% 210.76%
2072/73 117.26% 67.77% -49.49% 76.45%
2073/74 -65.89% -76.84% -10.95% 76.29%
2074/75 -84.31% -124.51% -40.21% 190.81%
2075/76 -2.00% 33.03% 35.04% -26.12%
2076/77 -6.16% -13.13% -6.97% -14.58%

50
 2077/78 233.50% 111.44% -122.06% -17.00%
Average return 31.71% 31.69% 49.12%
Source: Annual Report and Mero Lagani website

Figure 6. Risk-adjusted returns of Growth and Value portfolio based on PB ratio

2.1.1.2 Performance between Portfolios during Bullish and Bearish Period based on Risk-
adjusted Return
The performance evaluation will be presented in two major blocks. First, Bullish Period is picked
to begin the evaluation by presenting the annual risk-adjusted return, annually and quarterly, for
the Growth portfolio in comparison to the Value Portfolio. The pure returns are not adjusted for
the inherent risk associated with each investment. So, Risk adjusted return is considered for this
study. The bullish and bearish periods were defined in chapter one but for the reader’s comfort
the bullish and bearish period is presented in below table:
Table 10

Bullish and Bearish Periods

Bullish Periods Bearish Periods Bullish Periods
Year 2068/69-2072/73 2073/74-2075/76 2076/77-2077/78

51
Source: Investopaper website

a. Bullish period
Table 12 presents the risk adjusted return of portfolios based on both price multiples in bullish
period. In bullish period, the performance of the PE based Value portfolio was akin to PE based
Growth portfolio. Both Value portfolio outperformed Growth portfolio each other three times out
of six. So it is not wrong to state that value stocks are stronger than growth portfolio. However,
value portfolio was more successful to provide consistent positive return for five out of six years
compared to four out of six years from Growth portfolio. In that, the average yearly return of
value portfolio with 83.945% is greater than growth portfolio with 69.45% average annual
return.

PB based Value portfolio is clearly a winner between two portfolios based on PB measure as.
Both Value portfolio outperformed Growth portfolio four out of six years. So it is not wrong to
state that value stocks are stronger than growth portfolio. Both of the portfolios faced loss for
two years and were consistent in providing positive return. However, value portfolio was more
successful in providing greater yearly return. In that, the average yearly return of value portfolio
with 75.59% is greater than growth portfolio with 72.94% average annual return. However, the
difference between average annual return is not as significant as the returns between PE based
portfolio.

Table 11

Risk-adjusted return of PE and PB based Portfolios in Bullish Period

Based on PE Based on PB
Bullish Periods rowth value Value premium Growth Value Value premium
2068/69 - - - - - -
2069/70 67.13% 34.38% -32.75% 58.89% 118.30% 59.41%
2070/71 92.07% 253.93% 161.86% 68.26% 187.19% 118.93%
2071/72 -41.73% 2.96% 44.86% -34.12% -18.00% 16.12%
2072/73 144.34% 83.24% -61.1% 117.26% 67.77% -49.49%
2076/77 -10.07% -4.16% 5.91% -6.16% -13.13% -6.97%

52
 2077/78 164.96% 133.32% -31.64% 233.50% 111.44% -122.06%
Average(mean) 69.45% 83.94% 72.94% 75.59%
return

b. Bearish Period
Table 12 presents the risk adjusted return of portfolios based on both price multiples in bearish
period. Even in the Bearish period, the PE based Value portfolio was performing better than PE
based Growth portfolio. Value portfolio outperformed Growth portfolio in all three years of
bearish period resulting showed by positive value premium. So it is not wrong to state that value
stocks are stronger than growth portfolio. This either means the risk-free rate is greater than the
portfolio’s return, or the portfolio's return is expected to be negative. At the end of Bearish phase
in FY 2075/76 Sharpe’s ratio of Value portfolio again started to dominate with a ratio of 22.22%
return against the -13.32% return of growth portfolio. The average annual loss faced by PE based
value portfolio of -33% is also less compared to growth portfolio of -72%.

The result is opposite when compared with respect to portfolio based on PB ratio. Growth
Portfolio was performing better that value portfolio in the bearish environment. The value
premium was negative for continuous 2 years in the crisis. So there is no doubt that the Growth
portfolio had a really strong performance comparing to value portfolio when ranked according to
PB ratio in bearish market. However, the value portfolio stroked back with strong performance at
the end of bearish year 2075/76 with a ratio of 33.303% against the -33.032% Sharpe’s ratio of
growth portfolio. The average annual loss faced by PB based growth portfolio of -51% is also
less compared to growth portfolio of -56%.
Table 12

Risk-adjusted return of PE and PB based Portfolios in Bearish Period

Base on PE ratio Base on PB ratio
Bearish Periods Growth Value Value Growth Value Value
Premium Premium
2073/74 -84.72% -51.682% 33.041% -65.885% -76.840% -10.955%
2074/75 -119.15% -68.683% 50.466% -84.307% -124.512% -40.206%
2075/76 -13.32% 22.216% 35.532% -2.004% 33.032% 35.036%
Average return -72% -33% -51% -56%

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2.1.1.3 Results from Overall Performance of Portfolio
The table 13 presents Average yearly risk-adjusted return of PE and PB based Portfolios from
2068/69-2077/78. There is huge difference in average adjusted return in PE based portfolio.
Value portfolio with average yearly adjusted return of 45.06% stands out tall compared to
22.17% average yearly risk adjusted return of value portfolio. When portfolio is formed based on
PB ratio, the yearly average risk adjusted performance of growth and value portfolio is similar.
There no such big difference in average risk adjusted return of PB ratio compared to PB based
value portfolio. The difference is merely 0.02%. When the four average yearly risk adjusted
portfolio constructed in this research is compared, PE based value portfolio provides the highest
return of 45.06% among all the portfolios.
Table 13

Average yearly risk-adjusted return of PE and PB based Portfolios from 2068/69-2077/78

Price Multiples Price to Earning Price to Book Ratio
Portfolio Growth Value Growth Value
Average return 22.17% 45.06% 31.71% 31.69%

2.3 Findings
2.3.1 Efficient Market Hypothesis and Results from portfolios based on PE and PB
measure
Proponents of Efficient Market Hypothesis (EMH) claim that security prices fully reflect all
publicly available information in a rapid and unbiased manner. This would then mean that
making positive consistent risk-adjusted returns is impossible. Some of the other criticisms are;
First, the efficient market hypothesis assumes all investors perceive all available information in
precisely the same manner. The different methods for analyzing and valuing stocks pose some
problems for the validity of the EMH. No single investor is ever able to attain greater
profitability than another with the same amount of invested funds under the efficient market
hypothesis. Since they both have the same information, they can only achieve identical
returns. This means that finding differences in risk adjusted return between the portfolios based
on same fundamental information with different values such as low P/E outperforming the high
P/E portfolio for example, is not possible.

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EMH advocates states that the average investor can’t beat the market, but the market is simply
the average decisions of all investors taken together. In other words, the average investor and the
market are synonyms for each other. So, EMH states that the average investor cannot beat the
average investor, or the market cannot beat the market. Which seems to be tautological and
mostly useless

The implications that this would have on our research would then first of all mean that a
portfolio, any portfolio whether it was a high or low P/E or high or low P/B could not beat the
returns, if adjusted to risk, from the market. Opponents of this Hypothesis question its validity by
explaining various anomalies in stock markets. One such anomaly that they elucidate is price
earning (PE) ratio and Price to book(PB) ratio Effect, which is based on the premise that PE and
PB ratios are indicators of the investment performance of a security and low PE and PB stocks
have a tendency to outperform high PE and PB stocks even after adjusting for underlying risks.
The purpose of the study is to empirically test the relationship between portfolios based on PE
ratios and equity returns in Nepal stock Exchange based on monthly stock returns of 44
companies during the period 2068/69-2069/70 and thereby to examine the validity of efficient
market hypothesis. 

About the returns, there need not to be skeptic to state that the value portfolio has a really strong
performance comparing to growth portfolio when ranked according to PE measure for both non-
risk adjusted and risk adjusted return. Both value portfolio and growth portfolio were successful
to beat market’s risk adjusted return for three times each. However, value portfolio was busier in
providing consistent return over the nine years. When compared on the basis of PB ratio, value
portfolio was again phenomenal in providing consistent non-risk adjusted return. PB based value
portfolio dominated growth portfolio for six years out of nine years. The result is a bit different
when portfolio is compared with risk adjusted return. The hierarchy appears without doubt. The
growth portfolio rules over the others. The growth portfolio performed better than market’s risk
adjusted return and growth portfolio. Growth portfolio overpowered value portfolio for five out
of nine years when the risk adjusted return of these portfolios were compared. In the same period

55
of nine years, growth portfolio managed to beat NEPSE for five years. This is the highest
dominance shown by a portfolio among all the portfolio based on PE and PB measure.

According to this theory, the Portfolios based on high and low-price multiple taken in this study
should not have better results than each other. As it is a case study, the result cannot be
generalized. However, it is observable that value portfolio with low PE ratios earned a premium
for investors during the period 2068/69-2077/78. An investor who held the low P/E ratio
portfolio earned higher returns than an investor who held the entire sample of stocks. This result
contradict the efficient market hypothesis. In that, in this study it is found that the portfolio based
on PB ratio and value ratio provided better returns than the market by a considerable margin in
eight out of nine years, which is also against the efficient market hypothesis.

2.3.2 Behavioral Finance and Results from portfolios based on PE and PB measure
Behavioral biases and constraints offer more convincing reasons for why low volatility stocks
have the potential to generate higher risk-adjusted returns than their high volatility counterparts.
research it is found that Growth portfolio based on PE ratio provided higher returns than growth
stocks during the period 2068/69-2077/78, by huge margin in five out of nine years Therefore, it
can be stated that, growth portfolio based on PB ratio provide higher returns than value stocks
PB ratio which is against behavioral finance. But when risk adjusted return portfolios is
measured on basis of PE ratio, The positive value-growth spread is observed which, leans
towards the rational explanation that value stocks provide higher return than growth stocks.
Moreover, this also suggest that the reason behind the fraction of outperformance by value stocks
over growth stocks is a compensation of risk rather than the behavioral explanation of investor
biases.

2.3.3 Results from Bullish and Bearish Period

Bull and bear markets are completely different beasts—and as an investor, it’s important to know
important to know both of the scenario in market. About the risk-adjusted performance ratios it is
far from simple to compare the portfolios. Indeed, in normal market conditions the return of the
fund is higher than the risk-free rate. So, the higher the risk-adjusted performance ratios are, the

56
better is the fund. However, the risk adjusted performance is lower under downward trend
market conditions.

Value strategy was best investing strategy in bullish market as well in both Price multiples to
earn highest risk adjusted return. It is because, PE based growth portfolio and value portfolio
outperformed each other for three years. However, PE based value portfolio provided higher
annualized return of 69.45% than growth portfolio of 83.94%. In the same bullish trend value
portfolio based on PB provided more consistent yearly return and average annualized return for
six years of bullish period. The average annualized return of value portfolio is 72.94% compared
to 75.09% of growth portfolio. However, there was no major noticeable difference in annual
return between them. There was only 3.5% of difference in value-growth spread in yearly
annualized return. The average risk adjusted return of PE and PB based value portfolio with
83.94% and 75.59% average annualized return was dominating against their respective PE and
PB based growth portfolio with 69.45% and 72.94%. Among all portfolio formed, PE based
Value portfolio with average annualized return of 83.94% have highest gain percentage in bullish
market.

For the both portfolios ranked according to PE and PB in 2073/74-2075/76, the risk adjusted
return were negative. Looking after all results of bearish market it can be said that investing
following the Value based portfolio was the better way to protect investor’s money from the
bearish market when portfolio is based on PE ratio. It is because, if we take all the PE based
portfolios in consideration with their respective risk adjusted return of 3-year bearish market,
value portfolio outperformed growth portfolio easily by huge margin most of the time and also
suffered -33% loss only compared to -72% loss of growth portfolio. Whereas if we take all the
PB based portfolios in consideration with their respective risk adjusted return of 3-year bearish
market, growth portfolio outperformed value portfolio two out of three time and suffered less
loss of -51% compared to -56% of loss of value portfolio. so, growth portfolio was the best
choice to get invested in stock market in bearish period according to PB measure. Value
investing based on PE ratio with -33% average annualized return outperformed PE based Growth
investing having -72% annualized return. whereas when portfolio based on PB ratio is compared,
growth portfolio with annualized return of -50.732% outshined value portfolio with annualized

57
return of -56.107%. Among all portfolio formed, PE based Value portfolio again better than all
other portfolios based on both price multiples. PE based value return had lowest loss percentage
with -33% annualized return in bearish market.

2.3.4 Previous research

Cameron Truong (2009, p. 1-7) conducted a study on the New Zealand Stock Exchange over the
time period 1997-2007 investigating if a value premium exists. The price-to earnings- ratio is
used and the conclusion that is drawn is that low PE stocks outperform high PE stocks in New
Zealand meaning that stocks that are considered to be value stocks once again are performing
better than growth stocks. The findings in this report support this argument as Value portfolio
outperformed growth portfolio in terms of both risks adjusted return and non-risk adjusted return.

Truong (2009, p. 1-7) investigated if a value premium existed on the stock exchange of New
Zeeland and using the P/E ratio as a measure showed that value stocks were performing better
than growth stocks. The result in this study is clearly supporting this argument. In fact, PE based
value portfolio outperformed all other portfolios based on PE and PB multiple when average
yearly risk adjusted return is compared between them.

Previous studies on growth and value stocks made internationally have concluded that there is a
value premium in the US market (Lakonishok, Shleifer, & Vishny, 1994, Fama & French, 1996,
and Chan & Lakonishok, 2004). Other studies have found this premium to exist also outside the
North-American market (Chan, Hamao, & Lakonishok, 1991 and Fama & French, 1998 In this
study value premium was found only in PE based portfolio in both risk adjusted and non-risk
adjusted return. PB based portfolio produced contrary result to above argument in both risk
adjusted and non-risk adjusted return.

Fama & French (1998) argue that using price-to-book as a classification tool provide an investor
higher return than classifying portfolios by other multiples. This was also acknowledged by
Bauman et al (1998) and Davis & Lee (2008). Fama & French (1998) and O’Shaugnessy (2005)
argue that portfolios classified by means of price-to-book provide a higher return than other
multiples due to the level of volatility. The study does not follow this argument. The research

58
produced result contrary to this argument. Value premium was negative when average yearly risk
adjusted return and pure return of value and growth portfolio based on PB ratio was compared.

59
 CHAPTER III
SUMMARY AND CONCLUSION

3.1 Research summary

The performance (non-risk adjusted returns and risk adjusted returns) of value and growth
portfolio based on PE ratio and PB ratio has been studied on two main aspects: non-risk adjusted
returns and risk adjusted returns. The value portfolio is compared to growth portfolio. The value
portfolios based on PE and PB measure has very similar characteristics when compared on basis
of non-risk adjusted returns expect with risk adjusted returns. Both non-risk adjusted return and
risk adjusted return is also compared to a national benchmark: NEPSE. For this sharps ratio of
return of value and growth portfolio based on both price multiples and market return is
calculated. This research paper studies ten years period of NEPSE and its stocks starting from
2068/69 to 2077/78. The Vice Fund has a better average returns performance whatever the
market conditions.

In this research it is found that value portfolio gained higher non-risk adjusted return and risk
adjusted return when portfolio is formed under PE ratio whereas growth portfolio outperformed
value portfolio when portfolio is based on PB ratio in terms of both non-risk adjusted and risk
adjusted return. However, PE based value portfolio was dominant over all other portfolio in both
non-risk adjusted return and risk adjusted return. The results partially verified findings from
previous literature that value premium exists when portfolio is based on PE measure. Taxes and
transaction costs were excluded from this study so in reality this would decrease returns but it
does not invalidate the findings totally as transaction costs are only a fraction of the turnover and
taxes account less than one third of the profit.

3.2 Conclusion
3.2.1 Answer to the research problem
The research question, if correctly completed, it helps to set out what is needed to be answered in
the research. This can help to make a plan for research, but might also lead to foresee any
potential challenges or problems. This assists to save time, energy, and effort. The main

60
objective of this research paper is to find out the better investing strategy between growth and
value investing strategy. The research question prepared at the inception of the research is as
follows:

1. Value vs. Growth stocks: which portfolio offered the highest non-risk adjusted return
during the period 2068/69-2077/78?
The question part is about the comparison of non-risk adjusted return between growth portfolio
and value portfolio. The value portfolio is clear for both price multiples when yearly return of
portfolios are compared. This means value portfolio based on both multiples outperformed their
respective growth portfolio based on PE and PB ratio when non-risk adjusted returns are
compared. The findings in this research shows both PE based and PB based value portfolio
outperformed growth stocks in six out of nine years of term. The average annual return of value
stock based on PE with 26% stock is higher than growth portfolio based on PE ratio with 12%
which again shows the dominance of value portfolio. However, it is not the same case PB based
portfolio. Even though value portfolio based on PB ratio was more successful to provide
consistent return, the average annual return of growth portfolio with 21% outperforms value
portfolio with 13%. Being this said, portfolio based on PE ratio offered highest pure return of
26% among all other portfolios based on two price multiples.

2. Which portfolio offered the highest risk-adjusted return during the period
2068/69-2077/78?
Again, the value portfolio based on PE ratio offered high risk adjusted returns to the investors.
This means, the risk-adjusted returns during the ten years of study showed that value portfolio do
perform better than value portfolio. PE based value portfolio outperformed growth portfolio for
six times out of nine years. This is not the case with PB based portfolios where value portfolio
got outperformed by growth portfolio five out of nine times. The average annual risk adjusted
return of value stock based on PE with 45.06% stock is higher than growth portfolio based on PE
ratio with 22.17% which again shows the dominance of value portfolio. Even though growth
portfolio based on PB ratio was more successful to provide consistent return, the average annual
return of growth portfolio and value portfolio is similar. There is no such big difference in return
value stock offered 31.69% return whereas growth portfolio returned 31.71%. There is only

61
0.02% value-growth spread. Being this said, portfolio based on PE ratio offered highest risk
adjusted return of 45.06% among all other portfolios based on two price multiples.

3. Which of the portfolio was more successful to beat the NEPSE’s non-risk
adjusted and risk adjusted return?
Looking at the analyzed data and finding in the previous chapter growth portfolio based on both
price multiple failed to beat market when non risk adjusted return of portfolios is compared with
pure return of NEPSE. This is true in the case of portfolios based on the PE ratio and PB ratio.
When the pure return on NEPSE is compared with portfolios based on PE ratio, NEPSE
outperformed both portfolio by huge margin. The annualized return of NEPSE is 54% compared
to 12% and 26% of growth and value portfolio both based on PE ratio. The result based on PB
ratio is also true for PB based portfolios. NEPSE gained 54% pure return whereas growth and
value portfolio based on PB ratio gained 21% and 13% respectively. The same is the case with
risk adjusted return. The average annual return of NEPSE is 49.12% compared to 22.17% and
45.06% of growth and value portfolio both based on PE ratio. The result based on PB ratio is
also true for PB based portfolios. NEPSE gained 49.12% pure return whereas growth and value
portfolio based on PB ratio gained 31.71% and 31.69% respectively.

4. Which style of investing offered the highest risk adjusted return in bullish and bearish
period occurred between the period 2068/69 and 2077/78?
In this study, the results of portfolios of two different price multiple across different market
environment is showed to find the supreme between value and growth. The evidence shows that
value investing is the outright significant dominant style in Nepal stock exchange for the bullish
period occurred between 2068/69 to 2077/78 when portfolio constructed on basis of both PE and
PB ratio is compared. PE and PB based value portfolio with 83.94% and 75.59% average
annualized return was dominating against their respective PE and PB based growth portfolio
with 69.45% and 72.94%. Among all portfolio formed, PE based Value portfolio with average
annualized return of 83.94% have highest gain percentage.

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In bearish market, the outcome between two price multiple’s Portfolio is quite different than
bullish market. Value investing based on PE ratio with -33% average annualized return
outperformed Growth investing based on PE ratio having -72% annualized return. whereas when
portfolio based on PB ratio is compared, growth portfolio with annualized return of -50.732%
outshined value portfolio with annualized return of -56.107%. Among all portfolio formed, PE
based Value portfolio again better than all other portfolios based on both price multiples. PE
based value return had lowest loss percentage with -33% annualized return in bearish market.
3.2.2 Contributions and research gap
The subject of difference in return of growth and value investing strategies in different market
scenario has been widely studied and investigated over several decades all across the globe. The
above literature review revealed that there are many previous researches focused mainly on the
large markets such as the American, or has used the European market as one single market.
There has been few research conducted on country specific markets and developing countries
market, however, to my knowledge after conducting literature research there are no studies
placing an in-depth focus on value investing solely on the Nepal stock Exchange. This leaves us
with an obvious research gap and this study intends to fulfill this gap.

This study investigates whether an investor can get superior returns when investing in value
stocks (cheap stocks neglected by the market with a bad performance record) compared to
investing in growth stocks (popular stocks with a good performance record) on the Nepal stock
exchange from 2068/69-2077/78. An interesting phenomenon that NEPSE rise dramatically from
late December 2020 after 3 years of crisis from mid 2017 to mid 2020, can be said that the
capital market in Nepal also have a high value and growth, and attractive enough for investors.
Therefore, research on the phenomenon of the value premium fairly interesting to do in Nepal
stock Exchange including the time bearish market from2073/74 to 2077/78.

Further, this study expands the theoretical knowledge within the field of finance and more
specifically value investing in a rather small stock market like Nepal Stock exchange. Even
though the results are not significant they still matter and future research can be built upon this
paper. While numerous articles discuss the performance of value and growth stocks in various
countries in various years, most scholars do not make the separation how value and growth

63
stocks performed in bull- and bear-markets since it can be assumed that the crises and/or
recessions fell outside the sample period. While the reasoning behind this remains unclear, it is
logical that the economy, including its national and international environment, changes during
and after bubbles and crises which could give distorted results on the long term.

So, this study covers the performance of value portfolio and growth portfolio in both bullish and
bearish market. The results of this study contribute with new results and theoretical knowledge
on how value and growth investing was affected by the recent bearish market on the Nepal stock
market. Since both growth and value investing is a popular strategy to undertake when investing
it is important for investors to know if the strategy is successful even when the economic
environment is turbulent and this study can be a guiding step in the right direction towards a
superior investment strategy.

3.2.3 Suggestions for future research

While value and growth stocks are studied during the period 2068/69-2077/78, some limitations
and implications for future research exist. Much more can be done about it. There are some
ideas to complete this thesis and bring more knowledge to investors willing to study more about
NEPSE. Along the process of conducting this research there are few suggestions for further
research in fields surrounding value and growth stocks. These suggestions could bring a deeper
understanding into the subject but also confirm results that previous studies have provided.

Firstly, the time period of this study is 2068/69-2077/78. It might be interesting to research the
strategies over longer time horizons. Think of longer formation periods or longer holding
periods. Also, it might be interesting to start the portfolio formation on another month, for
instance in January.

Secondly, this report does not study the potential ability of investment strategies to protect the
investor in bearish downtrend in great detail. Since this topic is not covered properly in this
research paper, it might be interesting to see if PE or PB measure, were actually able to protect
the investor during bearish stock markets.

64
Thirdly, this research is focused based only on Price multiples; PE ratio and PB ratio. This study
has not taken return on assets (ROA) and return on invested capital (ROIC) in to the account
while performing this study. Future research can be done by adding the effectiveness of the ROA
and ROIC as growth and value indicators.

Fourthly, Further research can also help us to learn more about the most optimal holding period
for a value portfolio. For this research, a one year holding period is used. It could be that a longer
(or shorter) holding period delivers even better returns. The relationship between the holding
period of a portfolio and the return has not extensively been researched.

At fifth, sample size used in this thesis is very small. This study research has taken only
Commercial Bank and Development Bank only as a part of research so one idea for future
researchers could be to instead investigate the whole Nepal stock market. This would generate a
bigger sample and the result might turn out in a differently way due to that.

Another limitation in this study is that the statistical tests concerning the difference between
returns produced by value and growth stocks which can be considered while conducting future
research.

65
66
 BIBLIOGRAPHY

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Bird, R. & Casavecchia, L. (2007). Sentiment and financial health indicators for value and
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 OTHER REFERENCES

 Commercial Bank and Development Bank. (2068/69 to 2076/77), Annual Report.

Websites
 https://www.investopaper.com/
 www.nrb.org.np
 www.wikipedia.org
 https://nepsealpha.com/
 https://merolagani.com/Index.aspx
 https://www.systemxlite.com/
 https://www.investopedia.com/
 https://www.forbes.com/advisor/
 APPENDICES

PE ratio of Commercial Bank and Development Bank

Company 2068/69 2069/70 2070/71 2071/72 2072/73 2073/74 2074/75 2075/76 2076/77 2077/78
name
ADBL 2.58 3.00 16.03 7.88 11.73 11.11 7.27 9.16 11.71 23.35
CCBL 0.00 0.00 47.49 26.23 34.25 35.41 15.56 17.32 15.33 35.06
BOKL 16.58 15.10 88.68 45.61 28.02 20.99 12.06 10.61 12.69 23.84
CZBIL 21.70 14.05 20.19 17.26 22.78 26.74 19.65 12.98 15.32 30.37
EBL 13.15 19.05 32.62 28.78 53.66 39.21 19.87 17.73 22.98 36.07
GBIME 5.93 18.91 26.09 23.87 22.90 16.92 13.01 10.81 14.69 23.13
HBL 14.89 18.86 24.73 24.73 35.24 26.43 18.07 16.52 19.91 17.25
JBNL 55.94 43.81 149.53 65.35 32.59 42.31 24.83 17.44 0.00 0.00
KBL 14.09 14.31 28.76 26.21 0.00 27.88 14.23 14.33 19.00 25.75
LBL 16.18 11.63 24.29 22.70 39.53 29.08 18.19 12.80 13.81 27.41
MBL 248.84 34.00 31.68 27.14 29.48 20.45 13.91 13.11 14.86 21.38
Mega 0.00 50.59 33.73 29.83 33.18 26.52 16.03 12.88 17.37 24.51
Nabil 16.01 19.89 33.30 33.29 39.52 33.81 18.27 16.79 21.66 41.78
NICA 0.00 20.66 27.53 23.69 34.13 24.33 30.87 14.19 17.22 35.36
NBB 3.46 10.21 19.79 15.64 21.82 24.19 15.63 11.09 14.28 17.13
NCCB 10.02 8.56 25.61 22.57 0.00 13.52 10.92 13.11 15.38 29.79
SBI 27.96 25.80 36.76 22.06 54.68 42.05 21.29 17.20 25.45 40.42
NIB 22.50 23.80 27.57 17.51 30.33 35.00 26.49 19.04 25.22 0.00
NMB 64.98 13.99 25.12 24.15 31.60 23.31 17.27 15.91 24.40 26.32
PRVU 0.00 0.00 0.00 5.67 21.27 13.63 13.64 11.54 16.68 25.79
PCBL 15.73 15.80 24.33 17.84 24.51 17.96 12.19 10.95 15.56 23.68
SANIMA 37.50 17.20 31.18 23.43 28.90 26.54 15.31 13.66 17.05 20.63
SCB 24.78 27.71 41.49 33.74 80.02 66.54 29.97 21.90 26.05 36.11
SBL 16.91 9.90 18.56 29.04 21.10 22.67 13.69 12.24 13.84 19.48
SRBL 19.94 14.65 36.90 20.35 31.26 27.63 14.29 11.85 15.07 22.92
GBBL 0.00 0.00 10.86 10.95 18.47 0.00 11.24 9.84 0.00 0.00
DBBL 0.00 0.00 0.00 0.00 20.72 12.93 11.88 11.93 0.00 0.00
EDBL 0.00 0.00 16.55 17.29 21.28 23.58 14.42 11.25 63.00 50.62
GBBL 0.00 0.00 12.56 13.27 13.58 19.05 13.89 10.55 13.39 24.23
GRDBL 0.00 0.00 0.00 0.00 0.00 205.57 85.54 43.16 25.59 163.47
 JBBL 0.00 7.75 25.40 14.24 10.26 16.84 11.99 9.95 14.20 24.78
KBBL 0.00 7.55 12.98 12.44 0.00 14.91 10.44 9.99 0.00 0.00
KSBBL 0.00 0.00 0.00 0.00 0.00 14.08 10.28 12.49 67.44 21.97
KRDBL 0.00 0.00 10.45 19.93 23.76 39.33 52.48 65.52 106.38 35.01
LBBL 0.00 0.00 0.00 0.00 17.12 4.16 7.90 7.81 14.64 32.94
MLBBL 0.00 0.00 0.00 0.00 12.61 8.14 8.03 7.42 13.12 20.30
MDBL 0.00 0.00 13.25 12.58 18.71 16.33 12.75 9.35 12.72 30.04
MNBBL 0.00 0.00 15.23 15.25 30.54 42.25 17.03 13.30 20.77 27.47
NABBC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -84.69
SAPDBL 0.00 0.00 0.00 0.00 0.00 17.77 16.19 9.03 30.46 49.19
SADBL 14.85 5.53 5.95 12.12 18.96 15.42 12.01 11.76 20.00 27.84
SHINE 0.00 0.00 14.43 13.72 0.00 13.41 13.63 9.96 14.11 16.96
SINDU 0.00 0.00 11.59 14.36 25.75 25.77 41.85 16.53 44.82 70.10
CORBL 0.00 0.00 0.00 0.00 0.00 0.00 20.15 4.76 10.23 564.66

PB ratio of Commercial Bank and Development Bank

Company 2068/69 2069/70 2070/71 2071/72 2072/73 2073/74 2074/75 2075/76 2076/77 2077/78
name
ADBL 0.73 0.76 2.60 1.76 2.45 1.82 1.06 1.59 1.60 2.49

CCBL 0.00 0.00 2.96 2.80 3.88 2.38 1.49 1.47 1.30 2.38

BOKL 3.31 2.81 3.16 3.96 2.69 2.91 1.39 1.47 1.31 2.24

CZBIL 1.97 2.10 3.85 3.31 4.62 3.07 1.50 1.52 1.28 2.60

EBL 3.43 4.97 7.94 6.45 10.78 6.68 3.38 3.06 3.08 3.19

GBIME 1.26 3.12 4.16 3.26 3.64 2.66 1.75 1.85 1.56 2.92

HBL 3.10 3.42 4.26 3.77 7.60 4.89 2.89 2.92 2.88 2.58

JBNL 1.50 3.83 5.96 4.17 3.95 3.08 2.08 2.19 0.00 0.00

KBL 1.56 1.56 3.27 2.78 0.00 2.42 1.22 1.61 1.36 2.71

LBL 2.33 1.90 3.59 2.29 4.72 3.02 1.80 1.60 1.47 2.51

MBL 1.00 1.80 4.40 4.14 4.89 2.69 1.56 1.92 1.61 2.71

Mega 0.00 3.37 3.79 3.34 4.35 3.58 1.28 1.63 1.50 2.78

Nabil 4.38 5.76 8.57 7.17 9.06 7.17 3.55 3.10 2.99 5.65

NICA 0.00 2.64 4.31 2.95 4.90 3.10 2.08 2.73 3.12 5.56

NBB 0.85 1.70 3.55 2.53 4.29 2.71 1.45 1.44 1.36 2.56

NCCB 0.91 1.38 3.59 3.09 0.00 2.48 1.19 1.47 1.32 2.59

SBI 4.03 5.04 7.18 4.72 10.44 6.14 3.14 2.80 2.64 2.52
NIB 3.18 3.67 4.44 3.40 4.24 3.65 2.59 2.60 2.25 0.00

NMB 1.59 1.92 3.63 3.67 5.23 3.28 1.75 2.10 2.65 3.00

PRVU 0.00 0.00 0.00 3.03 3.91 3.01 1.09 1.62 1.46 2.98

PCBL 1.88 2.47 4.13 3.23 5.06 2.82 1.96 1.91 1.74 3.22

SANIMA 2.03 2.15 4.92 4.12 5.55 3.39 2.30 2.41 2.28 3.16

SCB 5.98 6.50 9.56 6.84 14.03 7.56 4.24 3.65 3.42 3.12

SBL 2.41 1.82 4.46 3.66 4.20 3.24 1.77 1.87 1.81 2.73

SRBL 1.27 1.89 4.13 2.86 4.84 3.08 1.46 1.64 1.55 2.32

GBBL 0.00 0.00 1.92 2.29 3.21 0.00 1.50 1.48 0.00 0.00

DBBL 0.00 0.00 0.00 0.00 2.50 1.95 1.08 1.15 0.00 0.00

EDBL 0.00 0.00 3.85 3.77 4.55 4.44 2.35 1.88 2.23 5.28

GBBL 0.00 0.00 2.45 2.22 2.53 2.31 1.73 1.65 1.67 3.78

GRDBL 0.00 0.00 0.00 0.00 0.00 6.74 1.40 0.98 1.00 3.42

JBBL 0.00 0.63 1.80 1.38 1.35 1.70 1.18 1.28 1.31 3.45

KBBL 0.00 1.12 2.85 2.29 0.00 2.29 1.60 1.60 0.00 0.00

KSBBL 0.00 0.00 0.00 0.00 0.00 2.21 1.09 1.22 1.20 3.90

KRDBL 0.00 0.00 1.35 2.10 2.42 2.48 0.98 1.08 0.94 3.19

LBBL 0.00 0.00 0.00 0.00 3.04 0.53 0.96 1.11 1.16 3.21

MLBBL 0.00 0.00 0.00 0.00 3.19 1.56 1.11 1.23 1.17 2.70

MDBL 0.00 0.00 3.22 3.16 5.18 3.33 2.06 1.62 2.12 3.99

MNBBL 0.00 0.00 3.84 3.62 8.17 7.14 2.77 2.53 2.33 4.64

NABBC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 11.30

SAPDBL 0.00 0.00 0.00 0.00 0.00 1.70 1.06 1.05 1.06 3.02

SADBL 1.93 1.09 1.05 2.21 3.06 2.74 1.25 1.24 1.12 3.12

SHINE 0.00 0.00 3.04 2.82 0.00 2.85 1.99 1.72 1.60 1.81

SINDU 0.00 0.00 1.37 1.88 4.47 2.89 1.17 1.18 1.22 3.51

CORBL 0.00 0.00 0.00 0.00 0.00 0.00 1.75 1.20 0.86 5.18
Annualized Return (AR) ratio of Commercial Bank and Development Bank
2069/70 2070/71 2071/72 2072/73 2073/74 2074/75 2075/76 2076/77 2077/78

Company AR AR AR AR AR AR AR AR AR

ADBL 56% 7% -41% 83% -41% -23% 40% -4% 30%

CCBL 0% 0% -1% 48% -35% -39% 9% 2% 80%

BOKL -12% 49% 1% -15% 2% -37% 3% -10% 79%

CZBIL 23% 397% -5% 42% -38% -40% 1% -11% 114%

EBL 60% 17% -18% 63% -59% -50% 4% 4% 11%

GBIME 179% 62% -22% 11% -21% -21% 10% -12% 90%

HBL 9% 33% -9% 88% -39% -36% 4% -2% -6%

JBNL 175% 64% -25% 10% -22% -23% 5% -95% 0%

KBL 13% 121% -27% -94% 0% -37% 16% -10% 104%

LBL -5% 128% -32% 124% -54% -32% -7% -3% 94%

MBL 90% 38% 1% 24% -45% -39% 34% -12% 81%

MEGA 0% 190% -10% 47% -17% -63% 38% 11% 98%

NABIL 39% 27% -23% 25% -33% -37% -9% -2% 83%

NICA 0% 78% -32% 34% -42% -26% 47% 26% 80%

NBB 163% 149% -23% 75% -51% -44% 9% -1% 116%

NCCB 71% 218% -26% -100% 0% -30% 5% -21% 102%

SBI 37% 23% -28% 115% -50% -44% -3% -3% -5%

NIB 60% 39% -23% 54% -22% -14% -13% -14% -96%

NMB 46% 36% 0% 64% -31% -29% 16% 7% 15%

PRVU 13% 189% 68% 19% -2% -52% 51% -11% 113%

PCBL 43% 123% -19% 68% -40% -28% 2% -3% 94%

SANIMA 20% 382% -10% 38% -40% -22% 14% -2% 52%

SCB 4% 31% -29% 87% -33% -66% -7% -3% -7%

SBL -7% 100% -14% 34% -43% -35% 14% -4% 75%

SRBL 68% 0% -18% 98% -45% -39% 15% -6% 58%

GBBL 0% 0% 36% 38% -96% 0% 14% -100% 0%

DBBL 0% 0% 0% 0% -14% -48% 20% -91% 0%

EDBL 0% 0% -4% 18% -6% -45% -8% 10% 187%

GBBL 0% 0% -6% 23% -13% -22% 11% 1% 151%

GRDBL 0% 0% 0% 0% 0% -77% -29% 18% 228%

JBBL 0% 383% -16% 10% 28% -28% 25% 2% 197%

KBBL 0% 16% -15% -93% 0% -25% 12% -98% 0%

KSBBL 0% 0% 0% 0% 0% -51% 18% -9% 313%

KRDBL 0% 0% 38% 13% 5% -67% 8% -4% 254%

LBBL 0% 0% 0% 0% -74% 109% 49% -3% 231%

MLBBL 0% 0% 0% 0% -31% -15% 24% 2% 155%

MDBL 0% 0% 11% 79% -36% -41% -12% 38% 95%

MNBBL 0% 0% -5% 138% -24% -59% 3% -16% 117%

NABBC 0% 0% 0% 0% 0% 0% 0% 0% 0%

SAPDBL 0% 0% 0% 0% 0% -40% 8% 3% 204%

SADBL -28% 14% 128% 41% -5% -57% 7% -3% 208%

SHINE 0% 0% 6% -94% 0% -32% -1% -12% 20%

SINDU 0% 0% 50% 163% -36% -64% 19% -7% 199%

CORBL 0% 0% 0% 0% 0% 0% 13% 4% 506%