The value effect in stock returns: Evidence from Borsa İstanbul

This study investigates if value premium which is defined by the difference in returns of value and growth stocks, exists in the Istanbul Stock Exchange (ISE) for the period of July 2006 to June 2015. To determine value and growth stocks in the market, book to market, earnings to price, cash flow to price and dividend yields are used as proxy measures. Results show that there is no value premium in the ISE. Additionally, time series regression analysis is performed to study whether two factor model can explain the excess returns in between value and growth portfolios. Time series regression analysis results show that market risk factor explain the returns of the value and growth portfolios better than the value premium itself. In addition, two factor model seems to be an inadequate econometric model to explain the returns of the value and growth portfolios. Keywords: Value premium, value investment strategy, growth investment strategy,value stocks, growth stocks