Portfolio Selection Strategies in the Nigerian Capital Market: Value Stocks or Growth Stocks?

Abstract

The purpose of this paper is to compare the portfolio performance of value stocks and growth stocks and to determine which is more profitable for investors on the Nigerian Stock Exchange in the selection of portfolios. The data used in this paper comprise daily prices of all quoted companies in the First-tier for 2008 and 2009. Portfolios were formed on the basis of value stocks and growth stocks. Their performances were compared on a yearly basis to determine the best-performing strategy. Descriptive statistic methods were used in this study. This study shows that the growth stocks strategy outperformed the value stock strategy in the Nigerian Stock Exchange for the period under review, and this could be due to the high risk involved in a growth stock. The study recommends that the risk seeker investors should invest more in growth stocks due to their high returns/risk profiles. While risk-averse investors should invest more in value stocks due to their lower returns/risk profiles.