CONTRARIAN INVESTMENT STRATEGY IN GHANA'S PROPERTY MARKET

Abstract

Value investment strategy has achieved the superiority in equity market. When the strategy was applied to real estate, research found value premium in both aggregate and specific set of data. This study uses the information of residential properties in Ghana from 1Q1992 to 4Q2007 to investigate the performance of value and growth investing. This paper also aims to reveal the explanations for the existence of any value premium. The growth and value portfolios were established based on initial yield. The growth portfolios generated higher return than value portfolios in most of the examined period across three different investment horizons: 5-year,10-year and 13-year. The statistical significant of the results were confirmed by the t-test and the non parametric stochastic dominance test. Though the value premium did not exist, the regime-switching model was still employed to inspect the riskiness of each investment strategy. The result implied that value properties were riskier than growth properties in both states of the model. Based on such findings, this paper suggests that growth investing may generate better return for investors than value investing in Ghana residential property market from 1Q1992 to 4Q2007.