Abstract

http://ssrn.com/abstract=942076
 
 

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Value Premium and Methodological Biases? Evidence from the UK Equity Market


Panagiotis Andrikopoulos


De Montfort University - Department of Accounting and Finance

Arief Daynes


University of Portsmouth - Business School

David Latimer


Portsmouth Business School

Paraskevas Pagas


University of Portsmouth


Journal of Investment Management and Financial Innovations, Vol. 3, No. 3, pp. 40-58, 2006

Abstract:     
We look for the existence of a value premium in the UK equity market for the period 1987-2002. Previous studies are subject to four methodological biases: (1) survivorship bias, (2) look-ahead bias, (3) a downward bias in post-formation growth stock returns caused by excluding recently listed growth stocks from the data, and (4) an upward bias in post-formation value stock returns caused by computing long-term returns by cumulating monthly returns (Conrad and Kaul (1993)). We eliminate the first three biases by using a new survivorship bias and look-ahead bias free dataset, which contains a complete history of all UK stocks that were fully listed at any time during 1987-2002. We eliminate the fourth bias by computing post-formation holding period returns, as recommended in Conrad and Kaul (1993). Our results indicate that the value effect is far smaller than is reported in previous studies, and is neither economically nor statistically significant.

Keywords: Value Premium, UK Market, Contrarian Investments, Market Efficiency

JEL Classification: G11, G12, G14

Accepted Paper Series


Not Available For Download

Date posted: November 3, 2006  

Suggested Citation

Andrikopoulos, Panagiotis and Daynes, Arief and Latimer, David and Pagas, Paraskevas, Value Premium and Methodological Biases? Evidence from the UK Equity Market. Available at SSRN: http://ssrn.com/abstract=942076

Contact Information

Panagiotis Andrikopoulos (Contact Author)
De Montfort University - Department of Accounting and Finance ( email )
The Gateway
LE1 9BH
Leicester
United Kingdom
+44(0)116 250 6331 (Phone)
+44(0)116 251 7548 (Fax)
Arief Daynes
University of Portsmouth - Business School ( email )
Portsmouth, PO1 3DE
United Kingdom
+44 23 92844182 (Phone)
+44 23 92844037 (Fax)
HOME PAGE: http://www.port.ac.uk/departments/academic/ams/staff/title,1246,en.html
David Latimer
Portsmouth Business School ( email )
Portsmouth, PO1 3DE
United Kingdom
Paraskevas Pagas
University of Portsmouth ( email )
Department of Accounting and Finance
Portsmouth Business School
Portsmouth, Hants PO1 3DE
United Kingdom
+44(0)23 9284 4721 (Phone)
+44(0)23 9284 4037 (Fax)
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