Purpose-The main goal of this study is to apply the value investing criteria to a selected portfolio and to test the validity of basic value investment hypothesis. The return performance of the selected portfolio was examined over the other bank stocks in addition to assessing the risk and return criteria (Sharpe Ratio). The efficient ratio (Price/Book Value vs Price/Earnings ratios) in the formation of the selected portfolio is further explored. The paper aims to prove the existence of margin over P/B Value and P/E ratios to the banking sector in Turkey. Methodology-A universe of 6 banks (3 state and 3 private) trading in BIST-100 were selected within the framework of this analysis. BIST-100, MATRIKS DATA™ database was used to compile data for six selected banking stocks, for the 95 months period between February 2011 to December 2018. The performance of the selected portfolio was benchmarked over the control portfolio for the relevant financial year. Findings-In line with the results of the analysis and as observed in developed markets, the value investing strategies implemented for the selected banking shares listed in BIST-100, offer significantly high returns to the investors. Consequently, an investing strategy grounded on P/E ratio is more profitable than a value investing strategy relying on P/B ratio. The study thus demonstrates that the shares selected within the framework of the value investing concept garner superior returns compared to benchmark portfolio. Conclusion-As observed in developed markets, the value investing strategies implemented for the selected banking shares listed in BIST-100 results in significantly high returns for the investors. An investing strategy grounded on P/E ratio is therefore more profitable than a value investing strategy relying on P/B ratio.
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