Please this is due tonight. Thanks

Looking at the exhibit on page 571 that graphically portrays the characteristics of value and growth stocks, briefly explain why you would use the top down and bottom up fundamental active management strategies to focus on value stocks? On growth stocks? Is it possible to integrate the value and growth philosophies? Briefly explain.

Chaptee t6: Equityotoio Mengemerd stuategies 1 In summary, a growth investor a company ocises on the current and future econormic story in of of a market correction and, possibly, improving company ti nsonably strai ae valuation. The value investor focuses on share price i conceptual diff erence forward, but classifying individ ual stocks into the appropriate style is not always simple in rely on more easily obtained tinancia indicator elds, and EPS growth r portfolios. Exlhbit 16.16 shows one approach for classifying Grms accocding to styic amuand luations are time consuming to produce, iw as P:E and P/8V ratios, dividend le benchmark ket capitalization. Notice that value stocks are relatively cheap have modest growth opportunites (eg, regulated fitms), while growlh stocks tend to be expensive, reflecting their superior caruiugs potcitial (eg, technology firms) To get a better feel for the types of portfolios these iwo investment styles rmugntP Exhibit 16.17 lists representative samplcs of the top halings for the tHarho Capltat tion (HACAX) growth-oriented mutual fund and the T. Rowe Price Value fund as of September 30, 2010. Both funds feature large-cap compaics, investment approach in other important ways, biggest holdings emphasize t financial UPM, WFO side among a varicty of diverse holdings (PHE, GE, LUV). On average, the stocks in the HACAX portfolio tend to have higher P/E and P/BV ratios and greater future growth potentia appcar to have comparable levels of risk (ic, beta), but portfolios hold IBM I'RVLX holds stocks that tend to pay higher dividends, Interestingly, both and Schlumberger among their top holdings, although these stocks would seenm io be a better fit with HACAX's other positions. This underscores the room for investor judgment invo in classifying companies along the valuc-growth dimension. Although investors appear to pay somewhat more attention to gruwth-oriented strategies, research has shown that a valuc approach to portfolio management tends to provide superio returns. In particular, Capaul, Rowley, and Sharpe (1993) studied the long term performance of value and growth portfolios (detined by relative P/BV ratios) in stx countries the United Exhibit 16.16 Characteristics of Growth and Value Stocks Equity Market Growth Value Marke:Orented Co Size Small Capitalization Low Price/Book Low P/E High Yield Cyclicals Reguiated Industries High EPS Growth High Proftability Higher Valuations Consumer & Services Health & Technology Growth Dimension pyright O Frank Russell Company. Reprinted with permission from Frank Russell Company, Tacoma, WiA