Abstract

This paper investigates for a value effect in Egyptian firm returns using three different ways to determine value by sorting firms based on their past long-term returns (long-term contrarian), the book-to-market ratios (BE/ME), and the percentage changes in their BE/ME ratios (change). These three strategies are approaches commonly used to measure for value effect. Using sample period from January 1997 to April 2014, this study provides a strong evidence of an inter-firm value effect with three measures. The long-term return contrarian and BE/ME, produce significant abnormal raw returns of 2.18% and 2.01%, respectively. On the other hand, the percentage changes in their BE/ME provides weakly significant profits of 1.08% per month. This paper also shows that the value profits generated by all three alternative value strategies in Egyptian stock market can be explained by three-factor model.