The Value of a Two-Dimensional Value Investment Strategy: Evidence from the Korean Stock Market

Abstract

This paper examines whether the two-dimensional value investment strategy that incorporates both the value investment strategy and financial statement information can earn excess returns in the Korean stock market. The two-dimensional value investment strategy yields a return of 27.9 percent, which is 8.97 percent higher than the return provided by the simple value investment strategy. Thus, the result shows that the two-dimensional strategy is not only effective in the U. S. stock market, but also effective in emerging markets such as the Korean stock market. Furthermore, the two-dimensional value investment strategy shows that the higher return during a bear market demonstrates the strategy's protective ability.

Keywords:

• book-to-market ratio
• FSCORE
• glamor stocks
• value investment
• value stocks