A Test of the Errors-in-Expectations Explanation of the Value/Glamour Stock Returns Performance: Evidence from Analysts' Forecasts

28 Pages Posted: 17 Oct 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

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2001

Abstract

Several empirical studies show that investment strategies that favor the purchase of stocks with low prices relative to dividends, earnings, book value or other measures of value yield higher returns. Some of these studies imply that investors are too optimistic about (glamour) stocks that have had good performance in the recent past and too pessimistic about (value) stocks that had performed poorly. In this paper we examine whether investors systematically overestimate (underestimate) the future earnings performance of glamour (value) stocks over the 1976-1997 period. Our results fail to support the extrapolation hypothesis that posits that the superior performance of value stocks is because investors make systematic errors in predicting future growth in earnings of out-of-favor stocks.

Suggested Citation

Doukas, John A. and Kim, Chansog (Francis) and Pantzalis, Christos, A Test of the Errors-in-Expectations Explanation of the Value/Glamour Stock Returns Performance: Evidence from Analysts' Forecasts (October 12, 2001). Available at SSRN: https://ssrn.com/abstract=287578 or http://dx.doi.org/10.2139/ssrn.287578

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)

Register to save articles to
your library

Register

Paper statistics

Downloads
400
rank
71,332
Abstract Views
1,877
PlumX Metrics