Non-diversifiable risk in value and growth strategies. time trends and persistence analysis

Abstract

This study aims to provide an analysis of trends and resistance dynamics of the growth and value investment strategies, particularly in terms of aggressiveness to market risk, using the market factor of beta. Current ARFIMA (p, d, q) models are analyzed to capture the idea of the fractional integration of these strategies and the beta coefficient of the same in Dow Jones, Nasdaq, S&P 500, and the New York Stock Exchange. The findings suggest that there are substantial variations in the two strategies, with growth strategies being more prone to fluctuations and shocks in the market, whereas value strategies are strong and resilient. These differences are further supported by beta sensitivity analysis, where growth beta was found to be more risk-sensitive and value beta was found to carry a stabilizing influence, which would decrease return volatility over time.