Premium
Do Invesrtors Capture the Value Premium?
Author(s) -
Houge Todd,
Lughran Tim
Publication year - 2006
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2006.tb00139.x
Subject(s) - value premium , growth stock , business , value (mathematics) , capitalization , equity (law) , closed end fund , monetary economics , mutual fund , economics , financial economics , finance , capital asset pricing model , market liquidity , stock market , mathematics , linguistics , statistics , philosophy , market maker , political science , law , paleontology , horse , biology
Do investors realize higher returns by investing in value stocks instead of gorwth stocks? Examination of a sample of equity indexes, mutual funds, and large‐cap stocks reveals no evidence that value firms have earned higher returns than growth firms. The value premium reported in the literarture is historically strongest for small‐capitalization firms, yea average annual rerturns for small‐cap equity funds are 14.10% for value funds compared to 14.52% for growth funds. Despite dramatic increases in mutual fund expense ratios from 1965 to 2001, fee differences across style funds cannot explain the absence of a value premium.