Background: Most investors strive to achieve the same goal with their investments, maximize returns and profits. However, the approach deviates as there are many alternatives on the stock markets. Preferences such as the amount of risk also influences an investor’s selection of stocks. These assets are generally classified as growth and value stocks but choosing between growth and value stocks is difficult as previous studies have found contrasting results.  

Purpose: The purpose of this thesis is to examine the performance of growth and value stocks to establish which type is more favorable based on returns and risk-adjusted returns. Thus, distinguishing the superior investment strategy in comparison to the market benchmark.

Method: A deductive approach and quantitative method is utilized in this study by retrieving data of all stocks in the Swedish and Danish stock markets. These are thereafter sorted and 17 stocks are selected into each of the four portfolios, with a rebalance every year. The data includes key financial frameworks and stock prices to evaluate the performance of the constructed portfolios.

Conclusion: The results unveil that value stocks outperformed growth stocks regarding both actual returns and risk-adjusted returns.

Keywords: Growth stocks, Value stocks, Sharpe ratio, Treynor ratio, Efficient market hypothesis, Interest rate