Value Versus Growth: Is Buying Cheap Always a Bargain?

Abstract

Value investing is about buying stocks with strong fundamentals at a low price and selling the stocks when the ratio gets high. The authors comprehensively review this theoretical foundation and empirical evidence, pointing out the potential strategic use of the price-to-earnings ratio, book-to-market ratio, dividend yield, price-to-cash flow ratio, and EV-to-EBITDA ratio, explaining the value premium by pointing to non-market risks, behavioral mispricing, survivorship bias or data mining.