Value Timing: Risk and Return Across Asset Classes

73 Pages Posted: 17 Oct 2017 Last revised: 12 Mar 2018

Fahiz Baba Yara

New University of Lisbon - Nova School of Business and Economics

Martijn Boons

New University of Lisbon - Nova School of Business and Economics

Andrea Tamoni

London School of Economics & Political Science (LSE)

Date Written: March 9, 2018

Abstract

Returns to value strategies in individual equities, commodities, currencies, global bonds and stock indexes are predictable by the value spread. Common and asset-class-specific components of the value spread contribute equally to this predictability. Return variation due to common value is closely associated with standard proxies for risk premia, such as dividend yield, intermediary leverage and illiquidity, but it is at odds with models that exclusively generate a value premium in equities. Return variation due to asset-class-specific value presents another challenge for asset pricing models. The outperformance of value timing and rotation strategies indicates that investors can benefit from the value spread in real-time.

Keywords: Value Premium, Value Spread Predictability, Stocks, Bonds, Currencies, Commodities

JEL Classification: E31, E43, E44, E52, E63, G12

Suggested Citation

Baba Yara, Fahiz and Boons, Martijn and Tamoni, Andrea, Value Timing: Risk and Return Across Asset Classes (March 9, 2018). Available at SSRN: https://ssrn.com/abstract=3054017 or http://dx.doi.org/10.2139/ssrn.3054017

Fahiz Baba Yara

New University of Lisbon - Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Martijn Boons

New University of Lisbon - Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Andrea Tamoni (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
02079557303 (Phone)

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