The Value/Glamour Anomaly: Evidence from Analysts' Forecasts

15 Pages Posted: 23 May 2001

See all articles by John A. Doukas

John A. Doukas

Old Dominion University - Strome College of Business

Chansog (Francis) Kim

The State University of New York at Stony Brook

Christos Pantzalis

University of South Florida

Date Written: May 2001

Abstract

Several portfolio managers and stock analysts subscribe to the view that value (high book-to-market) investment strategies yield superior returns relative to glamour (low book-to-market) strategies. Empirical studies confirm that value investment strategies yield higher returns. However, the source of the superior performance of the value strategy and interpretation of the evidence remain controversial. In this paper we examine whether (i) investors systematically overestimate (underestimate) the future earnings performance of glamour (value) stocks, and (ii) value stocks are riskier than glamour stocks over the 1979-1998 period. Our results fail to support the view that the superior performance of value stocks is because investors make systematic errors in predicting future growth in earnings of out-of-favor stocks. Consistent with Fama and French (1992, 1996), our findings suggest that the return advantage of value investing strategies reflects compensation for bearing risk.

Suggested Citation

Doukas, John A. and Kim, Chansog (Francis) and Pantzalis, Christos, The Value/Glamour Anomaly: Evidence from Analysts' Forecasts (May 2001). EFMA 2001 Lugano Meetings. Available at SSRN: https://ssrn.com/abstract=271070 or http://dx.doi.org/10.2139/ssrn.271070

John A. Doukas (Contact Author)

Old Dominion University - Strome College of Business ( email )

2080 Constant Hall
Suite 2080
Norfolk, VA 23529-0222
United States
757-683-5521 (Phone)

HOME PAGE: http://www.efmaefm.org/0DOUKAS/doukas.php

Chansog (Francis) Kim

The State University of New York at Stony Brook ( email )

College of Business
Stony Brook, NY 11794
United States
5163040037 (Phone)
631-632-9412 (Fax)

Christos Pantzalis

University of South Florida ( email )

Tampa, FL 33620-5500
United States
(813) 974-3262 (Phone)

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