The Role of Expectations in Value and Glamour Stock Returns

Journal of Behavioral Finance, 2011

Brandes Institute Research Paper No. 03-2011

22 Pages Posted: 10 Aug 2011 Last revised: 17 Jul 2015

Date Written: June 1, 2011


When value and glamour stocks missed earnings expectation targets, what happened to their stock prices over the following year? Prices of value stocks increased when earnings expectations were beat and missed - and even when business fundamentals deteriorated. Glamour stocks behaved more predictably, with prices rising and falling after beats and misses, respectively.

In this report, the Brandes Institute investigates the role that expectations played in investors’ assessment of value and glamour stocks to better understand the sequence of events that allowed value stocks to deliver superior long-term returns. The evidence suggests an undercurrent of behavioral error, counters assertions published by select scholars, and provides fresh evidence explaining why value investing historically has been a successful long-term strategy.

Keywords: Brandes, Brandes Institute, value investing, value vs glamour, earnings expectations

JEL Classification: G10, G11, G12, G14, G15

Suggested Citation

Institute, Brandes, The Role of Expectations in Value and Glamour Stock Returns (June 1, 2011). Journal of Behavioral Finance, 2011; Brandes Institute Research Paper No. 03-2011. Available at SSRN:

Brandes Institute (Contact Author)

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