價值股與小型股在90年代的表現不如預期，顯示這些股票風格並不能帶給投資人過去文獻所顯現的報酬。近年來，有關風格擇時策略的研究開始興起，在美國、英國、日本皆發現了相當可觀的潛在報酬。此篇論文的目的，是要檢驗風格輪動策略在台灣股票市場的執行效果，以對國外的風格投資實證結果做延伸應用。首先，此篇論文探討風格輪動策略的潛在利益。接著，建立模型預測未來風格溢酬，並與消極策略比較績效結果。這裡使用的預測模型，調整自Bauer et al. (2004)所使用的動態模型方法，並增加適合度統計量的選擇條件，以確保模型估計期間內解釋變數的解釋力，最後選出在樣本外24個月中預測力最高的模型作為下一期的預測模型。實證結果顯示，風格輪動策略在台灣股票市場具有相當顯著的潛在報酬。在大型/小型輪動策略中，預測模型表現明顯比消極策略優秀，但在價值/成長輪動策略中，預測模型並沒有辦法顯著超越消極策略。而多重風格投資策略可以帶來更高的報酬，同時也涉及更高的風險。因為規模風格消極策略在樣本期間表現不佳，使得大型/小型輪動策略可以藉由預測模型打敗消極策略。然而，雖然價值/成長輪動策略的潛在利益頗大，但價值風格消極策略在樣本期間表現不俗，使得本篇論文的預測模型不易勝過消極策略。 / The disappointing performance of style consistency strategies during 1990s told us that value and small-cap stocks may not bring us the same returns as literature showed. Recently, researchers of style timing strategies have found a great potential benefit. The aim of this paper attempts to examine the execution of the style rotation strategies in Taiwan stock market and contribute to more extensive application of international style investment empirical results. First, this paper explores the potential benefits of the style rotation strategies. Then, the paper tries to predict the style premiums and compares the style rotation results to the passive strategies. Adjusting the dynamic modeling approach applied by Bauer et al. (2004), this paper adds the selection criteria of the likelihood score statistic to assure the in-sample explanatory power of 17 financial and economic variables, and chooses the forecast models with the highest out-of-sample forecasting power in the training period. The results show that the potential benefits of style rotation strategies were significant and worth researching in Taiwan stock market. The forecast models performed well in the small/large rotation strategies, but worse in the value/growth rotation strategies. The multi-style rotation strategy could provide higher return as well as involved higher risk. Because the small/large passive strategy performed poorly during the investment period, the size rotation strategy could beat the passive strategy through the forecast model. However, although the potential benefit of the value/growth rotation strategy was still large in the sample period, it was challenging to beat the passive value/growth strategy when the value/growth passive strategy performed well.

A consensus exists in the body of academic literature that stocks with high BE/ME characteristics outperform stocks with low BE/ME characteristics. Researchers disagree, however, as to the cause of the phenomenon. Two competing theories have emerged. The value premium originates either from the relative riskiness of high BE/ME value and low BE/ME growth stocks or from the persistent irrational pricing of those stocks. Market participants question whether the long lineage of academic research showing the existence of the value premium can actually be applied to their portfolio decision-making. The lack of a pervasive value premium across stock size strata suggests the return phenomenon may result from information asymmetry or trading noise, and not from the pricing of greater risk. The value premium appears to be exclusively available to market participants who can effectively navigate the smallest, most illiquid segment of the stock market. In other words, the value premium does not appear to be available to large institutional investors.

Abstract This dissertation contributes to the understanding of investor behavior by using personality traits to help explain investor decision-making. The work is novel, as personality traits have not been used much in finance research. The data used in this dissertation is also new to the field, consisting of observations on personality traits and socioeconomic variables combined with official records of investors’ stockholdings. The first essay provides evidence that personality traits significantly affect the stock market participation decision. The essay shows that subscales of traits (i.e., lower-level traits or facets) can provide a better model of behavior, with some subscales of a single higher-level trait having opposite effects on behavior. The novelty seeking subscales exploratory excitability and extravagance have positive and negative effects, respectively, and the reward dependence subscales dependence and sentimentality have positive and negative effects, respectively. The magnitudes of the effects are large, with marginal effects on the probability of being a stock market participant of up to four percentage points. The second essay explores the relationship between personality traits and risk aversion. We estimate risk aversion from equity holdings and from survey measures. The traits display a distinctive pattern of correlations with the estimates of risk aversion. Some traits are significantly related to observed portfolio characteristics such as portfolio volatility, number of stocks held, and trading frequency. The pattern of the traits’ relationships with the various measures of risk aversion indicates that personality traits should not be considered as merely drivers of risk aversion but as preference parameters distinct from risk aversion. The third essay shows that personality traits are related to an investor’s preferences for value versus growth stocks and for small capitalization stocks versus large capitalization stocks. We find more extravagant individuals favor large capitalization growth stocks; more impulsive people favor small capitalization growth stocks; more sentimental investors prefer small capitalization value stocks; and more social investors prefer small capitalization stocks with a tilt towards value. / Tiivistelmä Tämä tutkimus auttaa ymmärtämään sijoituskäyttäytymistä selittämällä sijoittajien päätöksentekoa heidän luonteenpiirteillään. Tutkimustuloksilla on uutuusarvoa, sillä luonteenpiirteiden merkitystä ei ole juurikaan tutkittu rahoitustutkimuksessa. Tutkimusaineisto on sekin luonteeltaan tavanomaisesta poikkeava, koostuen yksityishenkilöiden luonteenpiirteitä ja sosioekonomista asemaa kuvaavista muuttujista sekä heidän osakeomistustaan koskevista virallisista rekisteritiedoista. Tutkimuksen ensimmäinen essee osoittaa, että luonteenpiirteillä on merkittävä vaikutus yksityishenkilön päätökseen toimia osakemarkkinoilla. Tutkimustulosten mukaan osallistumispäätöstä kyetään ennustamaan paremmin käyttämällä luonteenpiirteiden pääluokkia mittaavien muuttujien sijasta luonteenpiirteiden alaluokkia mittaavia muuttujia. Tämä selittyy sillä, että alaluokkia mittaavilla muuttujilla on eräissä tapauksissa vastakkaismerkkisiä, pääluokkaa mittaavassa muuttujassa toisensa peittäviä, yhteyksiä osallistumispäätökseen. Tämä voidaan havaita muun muassa pääluokkaan ”elämyshakuisuus” kuuluvien ”kokeilunhalun” (+) ja ”tuhlaavaisuuden” (-) kohdalla, samoin kuin pääluokkaan ”palkkioriippuvuus” kuuvilla ”riippuvuudella” (+) ja ”sentimentaalisuudella” (-). Kaiken kaikkiaan luonteenpirteitä mittaavien muuttujien vaikutuksen suurusluokka on korkea, vastaten yksittäisen muuttujan kohdalla jopa neljän prosentin marginaalivaikutusta osakemarkkinoille osallistumisen todennäköisyyteen. Toinen essee tarkastelee luonteenpiirteiden ja riskinkarttamisen asteen välistä yhteyttä. Tutkimuksessa mitataan yksityishenkilön riskinkarttamisen astetta toisaalta hänen osakeomistuksensa rakenteen perusteella ja toisaalta kyselytutkimuksen avulla. Sijoittajien luonteenpiirteiden ja muodostettujen riskinkarttamisen astetta mittaavien muuttujien väliset korrelaatiot muodostavat selkeän rakenteen. Eräät luonteenpiirteet ovat merkitsevässä riippuvuussuhteessa muun muassa sijoittajan osakesalkun volatiliteettiin, salkkuun sisällytettyjen osakesarjojen määrään ja sijoittajan kaupankäyntiaktiivisuuteen. Luonteenpiirteitä kuvaavien muuttujien ja riskinkarttamisastetta kuvaavien muuttujien välisen yhteyden perusteella luonteenpiirteitä tulisi tarkastella enneminkin erillisinä sijoittajien preferenssejä kuvaavina muuttujina kuin riskinkarttamisasteen taustalla olevina perustekijöinä. Kolmas essee osoittaa, että luonteenpiirteet ovat yhteydessä siihen, suosiiko sijoittaja arvo- vs. kasvuosakkeita ja/tai alhaisen markkina-arvon vs. korkean markkina-arvon yhtiöiden osakkeita. Tutkimustulokset osoittavat, että ”tuhlaavammat” sijoittajat suosivat korkean markkina-arvon omaavia kasvuosakkeita, kun taas ”impulsiivisemmat” sijoittajat suosivat alhaisen markkina-arvon omaavia kasvuosakkeita. Vastaavasti ”sentimentaalisemmat” sijoittajat suosivat ylipäätään alhaisen markkina-arvon omaavia arvo-osakkeita, ”sosiaalisten” sijoittajien suosiessa heidänkin alhaista markkina-arvoa, suunnaten kiinnostustaan samalla arvo-osakkeisiin.

Bakgrund Värdeinvesteringar bygger på att handla lågt prissatta tillgångar i förhållande till värde. Många har under åren formulerat olika strategier för att identifiera underprissatta tillgångar. Särskilt populärt är strategier baserade på att handla bolag med låga nyckeltal såsom P/B- och P/E-tal. Dessa strategier visade i flertalet studier förmågan att generera riskjusterad överavkastning på 80- och 90-talet. Just dessa strategier har dock visat upp sämre resultat i senare studier gjorda på 2000-talet. På den svenska marknaden har riskjusterad överavkastning mellan åren 1980-2010 uppvisats. Det har dock förblivit obesvarat hur resultatet hade blivit på den svenska marknaden efter 2010. Syfte Syftet med studien är att analysera i vilken utsträckning en värdeinvesteringsstrategi baserad på P/B-, respektive P/E-talet, genererar riskjusterad överavkastning.   Metod Studien har antagit en kvantitativ strategi med en deduktiv ansats. Genom en tidsserieundersökning har portföljer skapats och analyserats utifrån främst avkastning och risk. I studien avser riskjusterad överavkastning sådan avkastning för portföljen som överstiger vad som kan förväntas enligt CAPM. Parvisa t-test har genomförts för att avgöra resultatens statistiska signifikans. Bolagen som ingår i studien har varit sådana noterade på Stockholmsbörsens Large Cap mellan 2010-06-30, till och med 2020-06-30.    Slutsats Samtliga portföljer genererade en riskjusterad överavkastning och, med utdelningar inkluderade, en sharpekvot som översteg ett. Strategin baserad på P/B-talet genererade högre riskjusterad överavkastning än strategin baserad på P/E-talet. / Background The fundamental aspect in value investing is to buy assets for a lower market price, than its fundamental value. Over the years a lot of investors have tried to create strategies in order to identify undervalued companies. Particularly popular is value investing strategies based on buying stocks with low P/E and P/B ratios. These strategies have, according to several studies, managed to gain risk adjusted excess returns during the 1980s and 1990s. But during the 2000s, studies have shown inferior results on the American market. On the Swedish market, studies have shown that excess return was possible during the period 1980-2010, but it is still unanswered how the strategy would have performed during the period 2010-2020.    Purpose The purpose is to analyze to what extent a value investing strategy, based on the P/E and P/B ratio, respectively, generates risk adjusted excess return.  Methodology The study is based on a quantitative strategy with a deductive approach. Through a timeseries analysis, portfolios have been created in order to analyze return and risk. Risk adjusted excess returns is in this study, is defined as all returns who exceeds expected return from the CAPM model. Paired T-test have been used to determine the results statistical significance. The assets included in the sample is companies listed on Stockholm Large Cap index between 2010-06-30 and 2020-06-30.    Conclusions All constructed portfolios gained risk adjusted excess return during the period and, with dividends included, a Sharpe ratio higher than one. The strategy based on the P/B ratio outperformed the strategy based on the P/E ratio.

Value creation in any stock market is a highly discussed topic with an abundant amount of generalized models aiming to predict future returns. Although no such tool exists yet there are, however, acknowledged models from peer-reviewed journals that have received a lot of attention over the years in examining company performance. This thesis is therefore built on the well-known Fama-French three-factor model. The original Fama-French three-factor model is extended by adding a new size premium and a new value premium, both based upon the spread between the return on invested capital (ROIC) – the weighted average cost of capital (WACC). The purpose of this is to make the returns of a portfolio account for cash flow and debt on top of risk, size, and value premium for a company. This thesis finds that the ROIC-WACC spread adds explanatory power to the existing Fama and French three-factor model on the Swedish stock market. The research method of this study is quantitative and deductive. The considered period is six years between the years 2014 and 2020.

Value and size related equity investment strategies are supported by a large body of empirical research that shows a persistent premium, both longitudinally and crosssectionally. However, the competing rational and behavioural finance explanations for the success of these strategies are a subject of debate. The rational explanation is that the premium earned on value shares or shares of small companies can be attributed to higher risk. Behaviouralists argue that such shares are not riskier and attribute the premium to cognitive errors and biases in human decision making. The purpose of this study is to determine, firstly, whether the value and size premium exist in South Africa during the period July 2006 to June 2012, which includes one of the worst equity market crises in history. Secondly, this study sets out to determine whether the premium earned on value and size strategies are adequately explained by the principles of rational finance theory. To provide evidence regarding the existence of the value premium and size effect, returns are analysed, cross-sectionally, on portfolios of shares sorted by value and size. For evidence of a rational explanation, returns are regressed on value and size variables, and the relative riskiness of value and small companies is analysed. The results show evidence of a value premium in portfolios of small companies, but not big companies. The size effect is found not to be statistically significant. While regressions do show significant relationships between value and size variables and returns, these variables are found not to be associated with higher levels of risk. The conclusion is that the evidence does not support a rational, risk based explanation of the returns

<p>The cross-sectional variation of stock returns used to be described by the Capital Asset Pricing Model until the early 90‟s. Anomalies, such as, book-to-market effect and small firm effect undermined CAPM‟s ability to explain stock returns and Fama & French (1992) have shown that simple firm attributes, like, firm size and book-to-market value can explain the returns far better than Beta. Following Fama & French many other researchers examine the explanatory powers of CAPM and other asset pricing models. However, most of those studies use US data. There are some researches done in different countries than US, however more out-of-sample studies need to be conducted.</p><p>To our knowledge there are very few studies using the Swedish data and this thesis contributes to that small pool of studies. Moreover, the studies testing the CAPM use the unconditional version of the model. There are some papers suggesting the use of a conditional CAPM that would exhibit better explanatory powers than the unconditional CAPM. Different ways of conditioning the CAPM have been proposed, but one that we think is the least complex and possible to make use of in the business world is the dual-beta model. This conditional CAPM assumes a different relationship between beta and stock returns during the up markets and down markets. Furthermore, the model has not thoroughly been tested outside the US. Our study is the first to use the dual-beta model in Sweden. In addition, the momentum effect has lately been given some attention and Fama & French‟s (1993) three factor model has not been able to explain the abnormal returns related to that anomaly. We test the Fama & French three factor model, CAPM and Carhart‟s four factor model‟s explanatory abilities of the momentum effect using Swedish stock returns. Ultimately, our aim is to find the best model that describes stock return cross-section on the Stockholm Stock Exchange.</p><p>We use returns of all the non-financial firms listed on Stockholm Stock Exchange between September, 1997 and April, 2010. The number of companies included in our time sample is 366. The results of our tests indicate that the small firm effect, book-to-market effect and the momentum effect are not present on the Stockholm Stock Exchange. Consequently, the CAPM emerges as the one model that explains stock return cross-section better than the other models suggesting that Beta is still a proper measure of risk. Furthermore, the conditional version of CAPM describes the stock return variation far better than the unconditional CAPM. This implies using different Betas to estimate risk during up market conditions and down market conditions.</p>

The cross-sectional variation of stock returns used to be described by the Capital Asset Pricing Model until the early 90‟s. Anomalies, such as, book-to-market effect and small firm effect undermined CAPM‟s ability to explain stock returns and Fama &amp; French (1992) have shown that simple firm attributes, like, firm size and book-to-market value can explain the returns far better than Beta. Following Fama &amp; French many other researchers examine the explanatory powers of CAPM and other asset pricing models. However, most of those studies use US data. There are some researches done in different countries than US, however more out-of-sample studies need to be conducted. To our knowledge there are very few studies using the Swedish data and this thesis contributes to that small pool of studies. Moreover, the studies testing the CAPM use the unconditional version of the model. There are some papers suggesting the use of a conditional CAPM that would exhibit better explanatory powers than the unconditional CAPM. Different ways of conditioning the CAPM have been proposed, but one that we think is the least complex and possible to make use of in the business world is the dual-beta model. This conditional CAPM assumes a different relationship between beta and stock returns during the up markets and down markets. Furthermore, the model has not thoroughly been tested outside the US. Our study is the first to use the dual-beta model in Sweden. In addition, the momentum effect has lately been given some attention and Fama &amp; French‟s (1993) three factor model has not been able to explain the abnormal returns related to that anomaly. We test the Fama &amp; French three factor model, CAPM and Carhart‟s four factor model‟s explanatory abilities of the momentum effect using Swedish stock returns. Ultimately, our aim is to find the best model that describes stock return cross-section on the Stockholm Stock Exchange. We use returns of all the non-financial firms listed on Stockholm Stock Exchange between September, 1997 and April, 2010. The number of companies included in our time sample is 366. The results of our tests indicate that the small firm effect, book-to-market effect and the momentum effect are not present on the Stockholm Stock Exchange. Consequently, the CAPM emerges as the one model that explains stock return cross-section better than the other models suggesting that Beta is still a proper measure of risk. Furthermore, the conditional version of CAPM describes the stock return variation far better than the unconditional CAPM. This implies using different Betas to estimate risk during up market conditions and down market conditions.