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Contrarian Investment Strategies in a European Context
Author(s) -
Brouwer Van Der Put Veld Iwan, Jeroen, Chris
Publication year - 1997
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.t01-1-00167
Subject(s) - contrarian , econometrics , univariate , economics , dividend yield , context (archaeology) , price–earnings ratio , earnings , financial economics , statistics , value (mathematics) , dividend , mathematics , cash flow , earnings per share , dividend policy , accounting , finance , geography , multivariate statistics , archaeology
In this paper we study value strategies for four European countries (France, Germany, the Netherlands and the United Kingdom). We find an outperformance for all four value variables which are investigated: the earnings‐to‐price (E/P) ratio, the cash‐flow‐to‐price (CF/P) ratio, the book‐to‐market (B/M) ratio and the dividend yield. This outperformance is especially remarkable for the CF/P ratio, which amounts to 20.8% between the top and bottom quintiles in a univariate model. In a regression analysis, in which all four value variables as well as a correction for the size effect are taken into account, we find a difference of 11.8% for the CF/P ratio. We demonstrate that this result cannot be explained by risk differences alone. Our findings confirm the outperformance of value strategies as found earlier by Chan, Hamao and Lakonishok (1991) and Lakonishok, Shleifer and Vishny (1994) for Japan and the United States respectively.