Capturing the Value Premium in the U.K. 1955-2001

Dimson, Elroy; Nagel, Stefan; Quigley, Garrett

doi:10.2139/ssrn.376340

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Capturing the Value Premium in the U.K. 1955-2001

27 Pages Posted: 12 Mar 2003

See all articles by Elroy Dimson

Elroy Dimson

University of Cambridge - Judge Business School; European Corporate Governance Institute (ECGI)

Stefan Nagel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research; CESifo (Center for Economic Studies and Ifo Institute)

Garrett Quigley

Global Systematic Investors LLP

Date Written: January 2003

Abstract

Using a new dataset of accounting information merged with share price data we find a strong value premium in the U.K. for the period 1955-2001. It exists among small-caps as well as among large-caps. However, there are challenges for small-cap managers wishing to capture these higher expected returns. We show that rebalancing-induced portfolio turnover for indexed small-value strategies can be substantial. Coupled with the relative illiquidity of the U.K. market for small-value stocks, this calls for strategies that sacrifice tracking accuracy in favor of reduced trading needs and lower trading costs.

Keywords: Value Premium, Book-to-Market, Trading Cost

JEL Classification: G12, G14

Suggested Citation: Suggested Citation

Dimson, Elroy and Nagel, Stefan and Quigley, Garrett, Capturing the Value Premium in the U.K. 1955-2001 (January 2003). Available at SSRN: https://ssrn.com/abstract=376340 or http://dx.doi.org/10.2139/ssrn.376340