On Value Premium, Part I: The Existence

DOI: 10.4236/jmf.2011.13014   PDF   HTML     4,328 Downloads   8,218 Views   Citations


A great deal of academic research provides solid evidence that value investing generated better returns than growth investing from the early 1970s to the mid-1990s. However, the relatively poor performance of value stocks in the late 1990s generated suspicion that value investing was failing. Such claims were invalidated by empirical research showing that value stocks’ slump in this period was not caused by a change in fundamental patterns, but rather by investors’ overly-rosy expectations for new technology companies.

Share and Cite:

C. Ling and S. Koo, "On Value Premium, Part I: The Existence," Journal of Mathematical Finance, Vol. 1 No. 3, 2011, pp. 109-119. doi: 10.4236/jmf.2011.13014.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] B. Graham and D. Dodd, “Security Analysis,” 6th Edition, Graw-Hill, New York City, 2009, pp. 61-70.
[2] S. Basu, “Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis,” Journal of Finance, Vol. 32, No. 3, 1977, pp. 255-274. doi:10.2307/2326304
[3] E. F. Fama and K. R. French, “The Cross-Section of Expected Stock Returns,” Journal of Finance, Vol. 47, No. 2, 1992, pp. 427-465. doi:10.2307/2329112
[4] J. Lakonishok, A. Shleifer and R. W. Vishny, “Contrarian Investment, Extrapolation, and Risk,” Journal of Finance, Vol. 49, No. 5, 1994, pp. 1541-1578. doi:10.2307/2329262
[5] L. K. C. Chan, Y. Hamao, and J. Lakonishok, “Fundamentals of Stock Return in Japan,” Journal of Finance, Vol. 46, No. 5, 1991, pp. 1739-1764. doi:10.2307/2328571
[6] E. F. Fama and K. R. French. “Value versus Growth: The International Evidence,” Journal of Finance, Vol. 53, No. 6, 1998, pp. 1975-1999. doi:10.1111/0022-1082.00080
[7] R. W. Banz, “The Relationship between Return and Market Value of Common Stock,” Journal of Financial Economics, Vol. 9, No. 1, 1981, pp. 3-18. doi:10.1016/0304-405X(81)90018-0
[8] L. K. C. Chan and J. Lakonishok, “Value and Growth Investing: Review and Update,” Financial Analyst Journal, Vol. 60, No. 1, 2004, pp. 71-86. doi:10.2469/faj.v60.n1.2593
[9] C. Asness, “The Interaction of Value and Momentum Strategies,” Financial Analysts Journal, Vol. 53, No. 2 1997, pp. 29-36. doi:10.2469/faj.v53.n2.2069
[10] D. Kent and S. Titman, “Market Efficiency in an Irrational World,” Financial Analysts Journal, Vol. 55, No. 6 1999, pp. 28-40. doi:10.2469/faj.v55.n6.2312
[11] L. K. C. Chan, J. Lakonishok, and T. Sougiannis, “The Stock Market Valuation of Re- search and Development Expenditures,” Journal of Finance, Vol. 56, No. 6, 2001. pp. 2431-2456. doi:10.1111/0022-1082.00411
[12] J. Piotroski, “Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers,” Journal of Accounting Research, Vol. 38, 2000, pp. 1-41. doi:10.2307/2672906
[13] L. K. C. Chan, J. Karceski and J. Lakonishok, “New Paradigm or Same Old Hype in Equity Investing?” Financial Analysts Journal, Vol. 56, No. 4, 2000, pp. 23-36. doi:10.2469/faj.v56.n4.2371

comments powered by Disqus

Copyright © 2020 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.