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Good News for Value Stocks: Further Evidence on Market Efficiency
Author(s) -
PORTA RAFAEL LA,
LAKONISHOK JOSEF,
SHLEIFER ANDREI,
VISHNY ROBERT
Publication year - 1997
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.1540-6261.1997.tb04825.x
Subject(s) - earnings , growth stock , economics , portfolio , stock (firearms) , financial economics , value (mathematics) , abnormal return , differential (mechanical device) , monetary economics , rate of return , stock market , econometrics , restricted stock , finance , stock exchange , mathematics , statistics , engineering , aerospace engineering , mechanical engineering , paleontology , horse , biology
This article examines the hypothesis that the superior return to so‐called value stocks is the result of expectational errors made by investors. We study stock price reactions around earnings announcements for value and glamour stocks over a 5‐year period after portfolio formation. The announcement returns suggest that a significant portion of the return difference between value and glamour stocks is attributable to earnings surprises that are systematically more positive for value stocks. The evidence is inconsistent with a risk‐based explanation for the return differential.