We show that the value premium during the post-1963 period can be explained when both investors’ risk preferences and return distributions are allowed to time-vary. A large positive value premium is observed during the periods when asymmetric response to market movements is allowed; i.e., average value-minus-growth portfolio returns are more than 2% a month during these periods. Although the value premium appears to be countercyclical as these periods are associated with bear markets, it does not reflect increased risk. On the contrary, our empirical evidence supports that the value premium is due to the correction of mispricing, in particular, of value stocks. Because of investors’ overconfidence and biased self-attribution, the price correction accelerates when noisy public signals are positively biased or volatile.
JEL Classifications: G12
Keywords: Value premium, Regime switching, Beta, Downside beta, Higher moments, Overconfidence and biased self-attribution.
학회소식
학회소식
[2011년 제 1차] Is Value Really Riskier Than Growth?
작성자 : 관리자
조회수 : 777
게시일 :
2011-02-23