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Institutional Ownership and the Value Premium

36 Pages Posted: 25 Jul 2004  

Ludovic Phalippou

University of Oxford - Said Business School; University of Oxford - Oxford-Man Institute of Quantitative Finance

Date Written: January 2007

Abstract

Consistent with mispricing explanations proposed in the literature to explain the value premium, the value premium is driven by stocks held by individual investors. Stocks held by institutional investors do not exhibit any significant value premium nor value effect while representing 93% of the market capitalization. In contrast, in stocks most held by individual investors the value premium, even value-weighted, reaches a staggering 2% per month. This shows that the value premium is likely to be due to mispricing and that arbitraging it entails substantive costs.

Notes: Previously titled "Institutional Ownership and Valuation Ratios"

Keywords: behavioral finance, book-to-market ratio, institutional ownership

JEL Classification: G12, G14, G20

Suggested Citation

Phalippou, Ludovic, Institutional Ownership and the Value Premium (January 2007). EFA 2004 MAASTRICHT. Available at SSRN: https://ssrn.com/abstract=360760 or http://dx.doi.org/10.2139/ssrn.360760

Ludovic Phalippou (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

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