A consensus exists in the body of academic literature that stocks with high BE/ME characteristics outperform stocks with low BE/ME characteristics. Researchers disagree, however, as to the cause of the phenomenon. Two competing theories have emerged. The value premium originates either from the relative riskiness of high BE/ME value and low BE/ME growth stocks or from the persistent irrational pricing of those stocks. Market participants question whether the long lineage of academic research showing the existence of the value premium can actually be applied to their portfolio decision-making. The lack of a pervasive value premium across stock size strata suggests the return phenomenon may result from information asymmetry or trading noise, and not from the pricing of greater risk. The value premium appears to be exclusively available to market participants who can effectively navigate the smallest, most illiquid segment of the stock market. In other words, the value premium does not appear to be available to large institutional investors.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:552394 |
| Date | January 2010 |
| Creators | Scislaw, Kenneth Edward |
| Contributors | McMillan, David |
| Publisher | University of St Andrews |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://hdl.handle.net/10023/936 |
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