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Is Value Riskier Than Growth?

35 Pages Posted: 23 Nov 2003  

Ralitsa Petkova

Case Western Reserve University - Department of Banking & Finance

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

Yes! We study the time-varying risk patterns of value and growth stocks across business cycles. We find that the conditional market betas of value stocks covary positively with the expected market risk premium, and that value stocks are riskier than growth stocks in bad times when the expected market risk premium is high. The opposite is true for growth stocks. Methodologically, we measure time-varying risk by sorting conditional betas on the theoretically justified expected market risk premium, instead of the ex post realized market excess return. Our findings lend support to the predictions of recent rational asset pricing theory.

Keywords: Value, Growth, Asymmetric Beta, Expected Risk Premium, Business Cycles

JEL Classification: G0, G1

Suggested Citation

Petkova, Ralitsa and Zhang, Lu, Is Value Riskier Than Growth? (January 2003). Simon School of Business Working Paper No. FR02-17; AFA 2004 San Diego Meetings. Available at SSRN: https://ssrn.com/abstract=330180 or http://dx.doi.org/10.2139/ssrn.330180

Ralitsa Petkova

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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