Value versus glamour investing : a South African case

Abstract

Evidence from international and local studies indicates that the value investment style consistently earns returns above those of the growth investment style. The same principle seems to apply, in an international context, when using the glamour investment style, which is a sub-style of growth, as a comparative to value investing. This study aims to prove which style, value or glamour, outperforms the other thereby confirming or denying the presence of an international phenomenon in a South African context. This study replicates a two-variable method that was pioneered in the United States, to divide stocks into value and glamour portfolio’s each year. The portfolios were analysed using a five year buy-and-hold method after which the overall performance of the two portfolios was consolidated to determine which style outperformed the other. The results of the study indicate support of the international evidence with the local results in some respects achieving far greater returns using the value investment style. This presents an opportunity for private or institutional investors to achieve consistent and abnormal returns on the JSE.