Value versus growth: Australian evidence

Philip Gharghori, Sebastian Stryjkowski, Madhu Veeraraghavan

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)


The value-growth effect is one of the most pervasive patterns in stock prices. In this study, the ability of four proxies for value-growth, book-to-market, sales-to-price, earnings-to-price and cash-flow-to-price to explain equity returns is analysed. The findings show that in aggregate, book-to-market best explains cross-sectional variation in Australian equity returns, which in isolation suggests that it is the superior proxy for value-growth. The analysis is taken further and the value-growth effect is examined separately in positive and negative earnings firms. After segregating firms, it is found that in the negative earnings sample, book-to-market is the best value-growth proxy and in the positive earnings sample, cash-flow-to-price has the highest level of significance and is thus the superior value-growth proxy. The economic significance of this result is telling, as the firms that report positive earnings are much larger than those that report negative earnings.

Original languageEnglish
Pages (from-to)393-417
Number of pages25
JournalAccounting and Finance
Issue number2
Publication statusPublished - 06-2013

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


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