Is the Value Spread a Good Predictor of Stock Returns? UK Evidence
This paper explores the predictive ability of the value spread in the UK. I replicate the US analysis of <link rid="b19">Liu and Zhang (2007)</link> using UK data. In addition, I extend their work by exploring the predictive ability of the book-to-market, market-to-book and value spread on other size and value investment strategies, namely: large-caps only; small-caps minus large-caps (SML); value stocks only; growth stocks only; value stocks minus growth stocks (VMG) and a market portfolio that includes all stocks. The results are consistent with <link rid="b19">Liu and Zhang (2007)</link> on the value spread. The value spread shows no predictive power for portfolio returns. Therefore, I show that the predictive power of book-to-market and market-to-book spreads depend on the portfolio formation strategies and the relative proportion of small-cap, large-cap, value and growth stocks in the portfolio. Copyright (c) 2009 The Author Journal compilation (c) 2009 Blackwell Publishing Ltd.
Year of publication: |
2009-09
|
---|---|
Authors: | Michou, Maria |
Published in: |
Journal of Business Finance & Accounting. - Wiley Blackwell, ISSN 0306-686X. - Vol. 36.2009-09, 7-8, p. 925-950
|
Publisher: |
Wiley Blackwell |
Saved in:
freely available
Saved in favorites
Similar items by person
-
On the information content of the fama and French factors in the UK
Mouselli, Sulaiman, (2008)
-
Estimating the Fama and French Factors in the UK - An Empirical Review
Michou, Maria, (2007)
-
On the Information Content of the Fama and French Factors in the UK
Mouselli, Sulaiman, (2008)
- More ...