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Contrarian Investment, Extrapolation, and Risk
Author(s) -
LAKONISHOK JOSEF,
SHLEIFER ANDREI,
VISHNY ROBERT W.
Publication year - 1994
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1994.tb04772.x
Subject(s) - contrarian , dividend , value (mathematics) , economics , exploit , financial economics , earnings , investment strategy , investment (military) , yield (engineering) , dividend yield , econometrics , monetary economics , dividend policy , finance , market liquidity , mathematics , materials science , computer security , politics , computer science , law , political science , metallurgy , statistics
For many years, scholars and investment professionals have argued that value strategies outperform the market. These value strategies call for buying stocks that have low prices relative to earnings, dividends, book assets, or other measures of fundamental value. While there is some agreement that value strategies produce higher returns, the interpretation of why they do so is more controversial. This article provides evidence that value strategies yield higher returns because these strategies exploit the suboptimal behavior of the typical investor and not because these strategies are fundamentally riskier.