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The Value Spread / Randolph B. Cohen, Christopher Polk, Tuomo Vuolteenaho.
- Format:
- Book
- Author/Creator:
- Cohen, Randolph B.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w8242.
- NBER working paper series no. w8242
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2001.
- Summary:
- We decompose the cross-sectional variance of firms' book-to-market ratios using both a long U.S. panel and a shorter international panel. In contrast to typical aggregate time-series results, transitory cross-sectional variation in expected 15-year stock returns causes only a relatively small fraction (20%) of the total cross-sectional variance. The remaining dispersion can be explained by expected 15-year profitability and persistence of valuation levels. Furthermore, this fraction appears stable across time and across types of stocks. We also show that the expected return on value-minus-growth strategies is atypically high at times when the value spread (the difference between the book-to-market ratio of a typical value stock and a typical growth stock) is wide.
- Notes:
- Print version record
- April 2001.
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