Value versus growth stocks and earnings growth in style investing strategies in Euro-markets

The authors study the Euro-zone during the period 1988-2003.  They first corroborate prior studies that show value strategies outperform growth strategies.  They then go on to define undervalued/(overvalued) value/(growth) stocks as those with high(low) EPS growth and high(low) E/P or B/P ratios, respectively.  They further show that undervalued value stocks outperform overvalued growth stocks over the period.

The authors further analyze the effect of expected EPS changes on value and growth strategies, following a study by Ahmed and Nanda in 2001.  The authors corroborate that study by finding that stocks with positive earnings momentum outperform those with negative earnings momentum, especially when combined with the undervalued value stocks.

Chahine, S. (2009). Value versus growth stocks and earnings growth in style investing strategies in Euro-markets. Journal of Asset Management, 9(5), 347–358.