35 Pages Posted: 23 Nov 2003
Date Written: January 2003
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: 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