Decomposing Value Globally

Applied Economics, Vol. 52, No. 42, 2020

41 Pages Posted: 26 Jun 2019 Last revised: 2 Oct 2020

See all articles by Yigit Atilgan

Yigit Atilgan

Sabanci University

K. Ozgur Demirtas

Sabanci University Graduate School of Management

A. Doruk Gunaydin

Sabanci University

Imra KIRLI

Sabanci University - School of Management

Date Written: June 22, 2019

Abstract

This paper utilizes an international context and revisits the findings which argue that the positive relation between book-to-market ratio and future equity returns is driven by historical changes in firm size in the US. After confirming these results in the US setting both in the original and a more recent sample period, we find that they do not hold in regions outside the US. In the international sample, book-to-market ratio has a significantly positive relation with future equity returns even after changes in firm size are controlled for in regression analyses. This positive relation is again visible when the orthogonal component of book-to-market ratio (which is independent from changes in firm size) is used as a sorting variable in portfolio analyses. Country-level analyses confirm the findings from regional analyses.

Keywords: value premium, decomposing value, size effect, cross-section of equity returns, international finance

JEL Classification: G11, G12, G15

Suggested Citation

Atilgan, Yigit and Demirtas, K. Ozgur and Gunaydin, A. Doruk and KIRLI, Imra, Decomposing Value Globally (June 22, 2019). Applied Economics, Vol. 52, No. 42, 2020, Available at SSRN: https://ssrn.com/abstract=3408440 or http://dx.doi.org/10.2139/ssrn.3408440

Yigit Atilgan (Contact Author)

Sabanci University ( email )

Orta Mahalle Üniversite Caddesi 27
Istanbul, Orhanli, 34956 Tuzla 34956
Turkey

K. Ozgur Demirtas

Sabanci University Graduate School of Management ( email )

Sabanci University, School of Management
Orhanli Tuzla
Orhanlı-Tuzla, Istanbul, 34956
Turkey
(+90) 216-483-9985 (Phone)
(+90) 216-483-9699 (Fax)

A. Doruk Gunaydin

Sabanci University ( email )

School of Management
Orhanli Tuzla
İstanbul, 34956
Turkey

Imra KIRLI

Sabanci University - School of Management ( email )

Istanbul
Turkey

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