Can mispricing explain the value premium?
Empirical research finds that stocks with low market-to-book (MTB) ratios outperform stocks with high MTB ratios. Rhodes-Kropf, Robinson, and Viswanathan separate the MTB ratio into mispricing and growth options components. We report that the mispricing component, but not the growth options componen...
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| Veröffentlicht in: | Financial management 2020-09, Vol.49 (3), p.615-633 |
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| container_title | Financial management |
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| creator | Jaffe, Jeffrey F. Jindra, Jan Pedersen, David J. Voetmann, Torben |
| description | Empirical research finds that stocks with low market-to-book (MTB) ratios outperform stocks with high MTB ratios. Rhodes-Kropf, Robinson, and Viswanathan separate the MTB ratio into mispricing and growth options components. We report that the mispricing component, but not the growth options component, predicts abnormal returns for up to 5 years. We also find that the mispricing component, but not the growth options component, provides incremental information relative to existing asset pricing models. Moreover, after controlling for mispricing, value no longer beats growth. Overall, our evidence is consistent with a behavioral explanation of the value premium. |
| doi_str_mv | 10.1111/fima.12272 |
| format | Article |
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| ispartof | Financial management, 2020-09, Vol.49 (3), p.615-633 |
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| source | Wiley Online Library Journals Frontfile Complete; Business Source Complete; Jstor Complete Legacy |
| subjects | Analysis Asset pricing G14 growth options Investment management Investments Management Methods mispricing ORIGINAL ARTICLE Pricing return predictability Value value premium |
| title | Can mispricing explain the value premium? |
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