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In the stock market, exciting companies often get the most attention. These are the fast growers, popular names, and stocks with strong market stories.
But a Bursa Malaysia study found that the less exciting choice performed slightly better.
Hani Nuri Rohuma’s study, Value Stocks versus Growth Stocks: An Examination of Bursa Malaysia, examined Bursa Malaysia stocks from January 2006 to January 2020. The period covered both normal market conditions and the 2007–2009 global financial crisis.
The main question was simple: did cheaper stocks perform better than more expensive growth stocks on Bursa Malaysia?
How the study grouped the stocks
Rohuma did not classify stocks using market labels such as “hot stock”, “growth story”, or “value play”. The study used a recognised academic method linked to the Fama and French value-growth framework.
The stocks were first sorted using the book-to-market ratio.
This ratio compares a company’s accounting value with its market value.
Book-to-market position What the study called it Simple meaning
Book-to-market position | What the study called it | Simple meaning |
| Highest 30% | Value stocks | Priced low relative to book value |
| Middle 40% | Not the main focus | Neither clearly value nor clearly growth |
| Lowest 30% | Growth stocks | Priced high relative to book value |
In simple terms, value stocks were the cheaper group, while growth stocks were the more expensive group.
The study also split the stocks by company size.
| Final group | Simple meaning |
| Large value | Big companies that were cheap |
| Small value | Small companies that were cheap |
| Large growth | Big companies that were expensive |
| Small growth | Small companies that were expensive |
This allowed the study to test two things: whether cheap stocks beat expensive stocks, and whether size changed the result.
How performance was measured
The study did not judge performance by return alone. It used risk-adjusted measures, including the Sharpe ratio, Treynor measure, and Jensen’s alpha.
This matters because a stock or portfolio with higher return is not always better. If it takes much more risk to earn that return, the result may be less attractive.
For retail investors, the point is simple: do not only ask, “How much did it make?” Ask, “Was the return worth the risk?”
What the numbers showed
Over the full study period, value stocks returned about 6% a year, compared with about 5% a year for growth stocks.
That means value stocks had a small advantage of around 1 percentage point per year.
| Finding | Plain meaning |
| Value stocks returned about 6% a year | Value performed slightly better overall |
| Growth stocks returned about 5% a year | Growth was close behind |
| Small value stocks performed best | Cheap small companies had the strongest result |
| Small growth stocks performed worst | Expensive small companies were the weakest group |
| Value did not win every year | The strategy required patience |
The result was not a dramatic victory. Value stocks did better, but only by a modest margin.
The clearest result came from small value stocks. These were smaller Bursa companies that were cheap relative to their book value. They delivered the strongest performance in the study.
What happened during the crisis
The 2007–2009 global financial crisis gave the study a useful stress test.
During the downturn, value stocks outperformed growth stocks. Their beta, which measures sensitivity to market movements, also fell below growth stocks during the crisis period.
This suggests that cheaper stocks offered some protection when market conditions became weaker.
For Malaysian retail investors, this is an interesting point. The boring, cheaper stocks did not only perform slightly better over the long run. They also held up better during a major downturn.
What this means for Malaysian retail investors
The study gives three practical lessons.
- Value investing needs patience
Value stocks did not win every year. In some years, growth stocks performed better.
This means value investing is not suitable for investors expecting quick results within weeks or months. The edge appeared over a longer period. - Small value stocks looked strongest, but real trading is harder
Small value stocks produced the best result in the study.
But in real life, small-cap stocks on Bursa can have lower trading volume and wider bid-ask spreads. Buying and selling may not be as easy as a paper portfolio suggests.
This means retail investors must think about liquidity, transaction cost, and position size. - Cheap does not always mean good
A high book-to-market ratio can mean a stock is cheap. But cheap does not automatically mean attractive.
A company may be cheap because investors have missed its value. It may also be cheap because the business is weak.
Book-to-market is a useful first filter, but investors still need to check earnings, debt, cash flow, management quality, and liquidity.
Limitations of the study
The findings are useful, but they should not be treated as a fixed rule.
The portfolios were hypothetical. Real investors face brokerage fees, bid-ask spreads, taxes, and liquidity problems.
The study period ended in January 2020. It does not cover Covid, the later interest-rate cycle, or the more recent Bursa market environment.
The study also used book-to-market as the definition of value. Other value measures, such as price-to-earnings or price-to-cash-flow, may produce different results.
Past performance is evidence, not a guarantee.
The takeaway
The less exciting choice performed slightly better.
From 2006 to 2020, Bursa Malaysia value stocks, measured by book-to-market ratio, edged out growth stocks. The advantage was modest, at about 1 percentage point a year.
The strongest result came from small value stocks, especially during weaker market conditions.
But this was not a shortcut. Value investing required patience, careful stock selection, and the ability to sit through years when growth stocks performed better.
The better lesson is not “buy cheap stocks blindly”.
The lesson is this: use valuation as a starting point, check the business carefully, and be patient enough for the strategy to work.
Reference: Rohuma, H. N. (2023). Value stocks versus growth stocks: An examination of Bursa Malaysia. International Journal of Economics and Financial Issues, 13(4), 143–151. https://doi.org/10.32479/ijefi.14649
Disclaimer: This article is for educational purposes only and does not constitute financial or investment advice. Always conduct your own research or consult a licensed financial adviser before making investment decisions.