As visualized in the cumulative return graphs and the appendixes, the performance of the valuation criteria portfolios after the 2007 crisis – the recovery – varies very much.
The appendix table starts from April 2008 – the same month the growth index is avail-able from Thomson DataStream.
The best-performing top-quintile portfolio formed on single valuation criterion during the 2008–2015 period is PB 4, for which the annual average return is 14,50 percent with 19,22 percent annual volatility beating the market (GI) clearly in both (an 11,67 percent average annual return and 18,41 percent volatility). The Z-ratios and alphas are very rarely statistically significant and thus the results are not analyzed further than the av-erage annual return and annual volatility. The next best performing portfolios were PE 2, EV/EBIT 1, PE 1 and EV/EBIT 2. Their annual average return varied between 12,24 and 14,16 percent. Their annual volatility varied between 17,49 and 18,41 percent.
The best performing momentum portfolio after the 2007 crisis was 3m2. In fact, it beat every value-based portfolio with 14,93 percent annual average return and 18,31 per-cent annual volatility. The other well-performing momentum portfolio was 6m1 with 14,57 percent annual average return and 17,30 percent annual volatility. It also beat all the value based portfolios.
The best performing value-combination portfolio after the 2007 crisis was R1 with an 12,57 percent average annual return and 18,75 percent annual volatility. The second best value-combination portfolio after the crisis is the second Graham-portfolio G2 with 10,6 percent average annual return and 18,72 percent annual volatility.
However, the value-momentum combination portfolio was also the best-performing portfolio after the 2007 crisis. It had an average annual return of 17,48 percent and annual volatility of 18,31 percent.
6 Summary
This thesis found the inverse EV/EBIT to be the best performing single selection crite-rion in the Swedish stock market during the 2000-2015 period among the EP, PB, PS, EV/EBIT, EV/S, three, six and twelve months momentum criteria. EV/EBIT is also the best-performing single selection criteria during the after-2007 crisis period. However the value-momentum combination portfolio outperformed also the EV/EBIT portfolio both during the whole sample period and during the after 2007-crisis period. Surpris-ingly, all the value investing anomalies did not exist in the Swedish markets.
For example, the PB criterion did not perform as well as the PE-portfolios, even though the earlier studies discussed in this thesis had found it to be efficient (e.g. Fama and French (1998)). The third price-based value criteria PS did neither perform well in the Swedish markets during the 2000-2015.
The result for the two enterprise value-based portfolios’ performance varied a lot during the sample period. A good performance of the top-quintile EV/EBIT portfolio did not come as surprise as it has been documented in the recent studies. (e.g. see Pätäri et al. (2016) for the Finnish evidence and Gray and Vogel (2012) for the U.S. evidence).
Pätäri et al. (2015) also discussed the other enterprise value based criterion discussed in this thesis – EV/S. They find that especially among the large-cap U.S. companies, the S/EV criterion outperformed the other criteria.
The momentum criteria did not perform very well during the sample period as only a few momentum portfolios succeed to exceed 10 % average annual return. However, the previous three months returns and the future performance had some anomalous
relationship. This stands in line with the previous U.S. studies (e.g. see Jegadeesh &
Titman, 2001).
The value-combination portfolios (Graham and ranking) did not outperform the best portfolios formed on the best single selection criterion although their performance was solid throughout the sample period. Especially the ranking portfolio formed the average ranking among the five single selection criteria performed well. This was in line with the previous studies (see e.g. Dhatt et al. (1999), Chan and Lakonishok (2004) Brown et al. (2008) and Ding et al. (2005) and Guerard (2006)). However, the value-momentum combination portfolio outperformed all the other observed portfolios.
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APPENDICES
Appendix1. Annual returns, volatility, Sharpe rations and Z-Rations starting 3/2008 in-cluding Stockholm Growth Index (=GI)
portfolio Average annual return Annual
volatility Sharpe ratio Z-ratio (Pi vs.
Market) Significance
G1 9,52 % 17,95 % 0,1505 -0,3462 0,7292
*** significant at 1% level, ** significant at 5% level, * significant at 10 % level
Appendix 2. Alphas and Betas compared to GI starting 3/2008
G1 0,6942 1,45 % 0,7665
*** significant at 1% level, ** significant at 5% level, * significant at 10 % level