A Comparative Study on the Excess Returns of Growth Stocks and Value Stocks in the Korean Stock Market

한국 주식시장에서 성장주와 가치주의 초과수익률 비교 연구

  • Koh, Seunghee (Dept. of Business Admin. and Economics and Business Research Center, Sookmyung Women's University)
  • 고승의 (숙명여자대학교 경영학부, 경제경영연구소)
  • Received : 2018.04.06
  • Accepted : 2018.07.20
  • Published : 2018.07.28


This study attempts to empirically investigate the excess returns of growth stocks in the Korean stock market comparing with those of value stocks. Recently, a few of IT and bio-pharmaceutical stocks with high growth potentials have accomplished dramatically high returns in the Korean stock market. Whereas, important prior studies in this line have observed negative excess returns from investment of growth stocks on average. And a few studies have reported that the distribution of excess returns from growth stocks is not normal but positively skewed. Empirical results of the present study are consistent with those of prior studies. Interestingly, the present study observed serial inverse correlation between excess returns of growth stocks and value stocks. Also, regardless of growth or value stocks, the stocks with higher PEG(=PER/ROE) showed higher excess returns.


  1. B. Rosenberg, K. Reid & R. Lanstein. (1985). Persuasive Evidence of Market Inefficiency. Journal of Portfolio Management, 11(3), 9-17.
  2. E. Fama & K. French. (1992). The Cross-Section of Expected Stock Returns. Journal of Finance, 47(2), 427-465.
  3. E. Fama & K. French. (1993). Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics, 33, 3-56.
  4. E. Fama & K. French. (1998). Value versus Growth: The International Evidence. Journal of Finance, 53(6), 1975-1999.
  5. J. Lakonishok, A. Shleifer & R. Vishny. (1994). Contrarian Investment, Extrapolation, and Risk. Journal of Finance, 49(5), 1541-1578.
  6. H. Chen. (2017). Do Cash Flows of Growth Stocks Really Grow Faster?. Journal of Finance, 72(5), 2279-2330.
  7. X. Zhang. (2013). Book-to-Market Ratio and Skewness of Stock Returns. The Accounting Review, 88(6), 2213-2240.
  8. Y. Chang & C. Kim. (2003). A Value Investment Strategy: Its Performance and Sources. Korean Journal of Financial Studies 32(2), 165-208.
  9. B. Kim & P. Lee. (2006). An Analysis on the Long-term Performance of Value Investment Strategy in Korea. Korean Journal of Financial Studies 35(3), 1-39.
  10. S. Koh. (2015). Convergent Momentum Strategy in the Korean Stock Market. Korea Convergency Society Journal, 6(4), 127-132.
  11. S. Koh. (2016). A Converging Approach on Investment Strategies, Past Financial Information, and Investors' Behavioral Bias in the Korean Stock Market. Korea Convergency Society Journal, 7(6), 205-212.
  12. K. Daniel & S. Titman. (1997). Evidence on the Characteristics of Cross Sectional Variation in Stock Returns. Journal of Finance, 52(1), 1-33.
  13. S. Penman & X. Chang. (2002). Accounting Conservatism, the Quality of Earnings, and Stock Returns. The Accounting Review, Vol. 77, No. 2, pp. 237-264.
  14. P. Mohanram. (2005). Separating Winners from Losers among Low Book-to-Market Stocks Using Financial Statement Analysis. Review of Accounting Studies, 10, 133-170.
  15. J. Piotroski. (2000). Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. Journal of Accounting Research, Vol. 38, Supplement, pp. 1-41.
  16. C. Asness, T. Moskowitz & L. Pedersen. (2013). Value and Momentum Everywhere. Journal of Finance, 58(3), 929-985.
  17. S. Basu. (1977). Investment Performance of Common Stocks in Relation to their Price Earnings Ratios: A Test of the Efficient Market Hypothesis. Journal of Finance, 32, 663-682.
  18. Z. Da. (2009). Cash Flow, Consumption Risk, and the Cross-Section of Stock Returns. Journal of Finance, 64(2), 923-956.
  19. K. Daniel, D. Hirshleifer, & A. Subrahmanyam. (1998). Investor Psychology and Security Market Under- and Overreactions. Journal of Finance, 53(6), 1839-1886.
  20. Y. Cho (2018). A Study on Social Finance Market in Korea; Focused on Social Impact Bond. Journal of Digital Convergence, 16(4), 11-22.
  21. S. Nam (2018). A Study on the Determinants of Consumer Trust toward Internet-Only Banks. Journal of Convergence for Information Technology, 8(2), 157-162.
  22. S. Guahk. (2017). Determinants of Capital Structure of High Potential Enterprises of Korea. Journal of Digital Convergence, 15(12), 233-238.
  23. C. Hong, S. Lee & K. Kim. (2017). The Effect of Analysts' Earnings Forecasts Following Dividend Announcement on Stock Returns. Journal of Convergence Society for SMB, 7(3), 105-109.
  24. A. Choi & J. Koo. (2017). A Study on Factors Affecting Foreign Direct Investment in Korea. Journal of Digital Convergence, 15(6), 1-8.
  25. M. Lee & K. Khoe. (2015). Development Method of Digital Content Finance-Focused on by Technical Value Evaluation. Journal of the Korea Convergence Society, 6(6), 111-117.
  26. J. Lee & K. Kim. (2016). The Effects of Accounting Service Worker's Professionalism and Accounting Information System's Level on the Quality of Customer's Accounting Information. Journal of Convergence Society for SMB, 6(3), 1-6.
  27. H. Jung (2018). A Study on the Investment Efficiency of Korean ETFs. Journal of Digital Convergence, 16(5), 185-197.
  28. K. Kim (2017). Impact on AIS Process and Firm Performance of Accounting Information System Based on Dynamic Capabilities Framework. Journal of Convergence for Information Technology, 7(5), 169-175.