The Volatility Effect in Value and Growth Stocks – Evidence from India


– Mayank Joshipura

– Shilpa Peswani


The paper studies the strength of low-risk anomaly in value stocks (low price-to earnings ratio stocks) and growth stocks (high price-to-earnings stocks) among the universe of listed stocks in the Indian equity market. It studies stocks listed on National Stock Exchange (NSE) for the period from January 1995 to April 2017. It provides evidence that in the Indian equity market, low risk anomaly and value effect, both
exists. The universe of value stocks delivers higher excess returns than the universe of growth stocks. Low risk anomaly enhances the performance of a portfolio consisting of value stocks. It also decreases the negative excess returns delivered by a portfolio of growth stocks. A portfolio consisting of lowest risk value stocks outperforms a portfolio consisting of lowest risk growth stocks as well as the benchmark
portfolio. The excess returns are highest for a portfolio of lowest risk value stocks. The worst investment strategy is investing in a portfolio of highest risk growth stocks. The long-short strategy in growth stocks delivers positive excess returns coupled with high standard deviation. The study provides a framework for an implementable strategy for practitioners to enhance investment returns.


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