Style Timing with the Value Spread in Australia
19 Pages Posted: 12 Aug 2008
Date Written: June 25, 2008
The value spread is shown to be positively related to the value premium in the Australian market. The relationship is statistically strong for both large cap and small cap portfolios. Our results represent out of sample support for previous studies finding a strong relationship between the value spread and the value premium in the US and Asian markets. In addition, we show that the differential between the small cap and large cap value spread is strongly positively related to the corresponding differential in the value premium, suggesting that the value spread can be used for style timing not only in the value/growth dimension, but also in the large cap/small cap dimension.
Keywords: value spread, value premium, style timing
JEL Classification: G11
Suggested Citation: Suggested Citation