Accounting and Finance Research Question

Questions: 1. What is the research question of interest to the authors of the paper? 2. Is this an interesting question? Why? 3. Why is this question related to or of interest to Accounting? 4. What is the source of tension in the paper that requires research? 5. In what setting is this question examined? 6. What does the paper find? 7. What does the paper conclude based on its findings? 8. How convincing is the evidence presented in the paper? How valid are the results? 9. How does this paper contribute to the literature, and to our knowledge? 10. What are the implications of this paper? Answers: 1. The research question of the paper is as follows: Is value stock can give higher return rather than growth stock and how risk can create impact on the return in case of value stock and growth stock 2. The research question is interesting because the area of research is different and no other research was done deeply on this aspect. In present scenario, the investment does not on the basis of financial statement analysis. There are also different factors and aspects that are associated with the return of an investment (Van Rooij, Lusardi and Alessie 2011). According to the various research studies, it has found that value stock can provide higher return rather than growth stock on average (Wachter 2013). But the return is not free from risk. So, understanding of risk in case of buying value versus growth versus growth is essential to recover from the value trap. Identifying the research question can help to find out the ways that can help to investors to avoid from falling in trap (large amount of risk). 3. The main focus of the task is to identify how vale-growth return is reflected by common factor risk. For the investing this, there are certain accounting techniques and tools are required to consider. In this research, several accounting terms such earnings-to-price and book-to-price has been considered for the analysis. These terms are under of accounting phenomena. These two term are called price multiples and these also indicate risk. So, it can be said that it this research is focused on how accounting measure of earnings and accounting book value. 4. According to different studies, it has found that value outperforms growth on average but considering certain amount of risk (Barinov 2011). But it has identified that value position against the investors. So, in this situation, it is not clear that what as investor is buying when investor buys value versus growth. On the other side, the labels are not particularly illuminating. If an investor does not concentrate on value and growth and also associated risk, they may face difficult situation. So, proper understanding should require about risk associated with higher return to value. 5.Researcher has conducted fundamental analysis for identifying the answer of research question. The analysis is entirely focused certain basis. Earnings to price and book to price multiples are employed together for identifying the results. These two multiples are employed to understand the risk exposure and also pay-offs to that risk associated with investment. At first, returns to value versus growth are investigated on the basis of earnings to price and book to price multiples over the period of time. Then, these two multiples are connected to risk and growth. After that, then analysis has done to find out the connection between accounting principle and growth to risk. Next, the focus has been given to identify the risky growth considering the book to price ratio. Then, the effect of B/P on stock return has been examined. Lastly, analysis of both value and growth are done together to identify the answer of research questions. 6.According to analysis, it has found that the average return spread between 2.2% return in case of low E/P and low B/P portfolio. On the other side, the average return is 28.8% in case of high E/P and high B/P. It indicates that the results are impressive. The second analysis show that if growth varies inversely with return of earnings (considering r g constant), then increasing book to price can increase the risk in case of growth. In case of low E/P, growth investor could be loading up risk if high B/P stock is purchased by an investor (Penman and Reggiani 2014). On the other side, avoiding these types stock and buying of low B/P yields can provide lower return. It has also determined that low B/P portfolios having lower beta can also have lower upside beta. At last, it has identified that growth with risk can produce higher B/P and growth can provide indentify higher returns rather than lower return. 7. According to the analysis, it has concluded that high E/P which is denoted as value stock and the growth is risky. In case of combination of E/P and B/P, the risk is greater than only high E/P stock (Penman 2014). It can provide higher return. But expecting of higher return can increase the risk and expected earnings growth cannot be realized. 8. The analysis has not done only on the basis of financial statements. But several aspects are considered such as firm performance and market performance to identify the better result and determine the risk (Gulen, Xing and Zhang 2011). It is not only based of unsystematic risk but also systematic risk is considered for better findings. 9. The analysis done in this paper is different from previous studies. Advance techniques and methods are used and dept analysis has done to identify to draw the conclusion. 10. This paper is helpful to both financial analyst and investor to get better idea about the stock investment. Reference List Barinov, A., 2011. Idiosyncratic volatility, growth options, and the cross-section of returns.Growth Options, and the Cross-Section of Returns (August 19, 201 Gulen, H., Xing, Y. and Zhang, L., 2011. Value versus Growth: Timeà ¢Ã¢â€š ¬Ã‚ Varying Expected Stock Returns.Financial management,40(2), pp.381-407. Penman, S.H. and Reggiani, F., 2014. The Value Trap: Value Buys Risky Growth.Available at SSRN 2494412. Penman, S.H., 2013.Accounting for value. Columbia University Press. Van Rooij, M., Lusardi, A. and Alessie, R., 2011. Financial literacy and stock market participation.Journal of Financial Economics,101(2), pp.449-472. Wachter, J.A., 2013. Can Timeà ¢Ã¢â€š ¬Ã‚ Varying Risk of Rare Disasters Explain Aggregate Stock Market Volatility?.The Journal of Finance,68(3), pp.987-1035.