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This study uses Taiwan EMP 99 Index as the variable of good companies. Empirical period is from January 2011 to December 2013. This study uses stock characteristics such as price-to-earnings, price-to-book, and cash dividend payout ratio to rank the stocks included in the EMP 99 index and form two portfolios of the top twenty stocks and the bottom twenty stocks. The study employs CAPM (Capital Asset Pricing Model) and Fama-French three-factor model to estimate the returns of portfolios and further compare them with the returns of Taiwan EMP 99 Index and Taiwan Stock Exchange Capitalization Weighted Stock Index. The empirical results show that the portfolios including twenty stocks with the lowest price-to-earnings ratio, the lowest price-to-book, and highest cash dividend payout ratio yield higher performance than the portfolios consisting of twenty stocks with the highest price-to-earnings ratio, the highest price-to-book, and the lowest cash dividend payout ratio. The return of portfolio with the highest cash dividend ratio is better than TSEC Weighted Stock Index and the EMP 99 Index in every year of empirical period. When using a buy-and-hold strategy in continuous three-year period, the portfolios with the lowest price-to-earnings ratio and the lowest price-to-book can beat the EMP 99 index and TSEC Weighted Stock Index.
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